22/08/24

GLOBAL TAX: UN Adopts Historic Tax Reform

As published on: occrp.org, Thursday 22 August, 2024.

After months of debate and pushback from wealthy nations, the United Nations (UN) adopted a resolution to begin the process of establishing a global tax framework intended to cause wealthy individuals to pay more taxes.

The resolution addresses matters such as fair allocation of taxing rights, tax evasion and avoidance by high-net worth individuals, and tax-related illicit financial flows.

The vote passed on August 16 by a landslide majority.

Its framework challenges the decision-making on global tax rules from the Organisation for Economic Co-operation and Development (OECD), a small club of rich countries that have set tax laws in their favour for decades.

“The OECD is widely blamed for designing a global tax system that haemorrhages nearly half a trillion dollars to tax havens every year, with non-member countries suffering the most intense damage,” said Tax Justice Network, a British advocacy group that focuses on tax avoidance, tax competition, and tax havens.

“The countries who had voted in 2023 against beginning this year’s UN negotiations represented only 15% of the global population, but were responsible for 75% of all tax losses countries suffer to tax havens yearly.”

The State of Tax Justice 2023 reported that countries were set to lose US$4.8 trillion over the next 10 years to multinational corporations and wealthy individuals, who take advantage of tax havens to underpay what they owe.

“Our countries are on course to lose nearly $5 trillion to tax havens over the coming decade. Countries at the UN just open the door to a better future where we avert this, and finally put an end to rampant tax abuse by multinational corporations and the super rich. A door that a few OECD countries tried to bolt shut,” said Tax Justice Network's Sergio Hernandez.

For decades, the result of the UN vote had been considered impossible to achieve. The last attempt to transfer decision-making authority on tax rules to the UN was in the 1970’s.

The resolution’s success, notwithstanding the resistance faced from the world’s strongest economies, is a rare feat; it demonstrates the overwhelming demand from countries outside the OECD for the meaningful voice on global tax rules, which they have historically been denied.

A total of 110 member states voted in favour of the reforms, while only eight voted against the resolution and 44 abstained.

Tax Justice Network said the terms of reference adopted at the UN, retained key elements necessary for making sure “the final version of the framework convention can protect countries’ taxing rights and claw back billions from tax havens.”

“These foundations include specific references to corporate tax, taxing wealthy individuals, tax avoidance and tax evasion, illicit financial flows, the allocation of taxing rights among countries, and alignment with human rights, sustainable development and the necessary response to environmental challenges.”

While the adoption of the resolution is being widely celebrated by government officials, economists and civil society organizations around the world, some are holding their breath until the proposed changes are actually implemented.

“It is essential that ambition does not wane in the final stretch,” Tax Justice Network said.