Proposal for a United Nations Convention on Tax
Tax-related illicit financial flows continue to cost countries hundreds of billions of dollars in lost tax income every year. This document contains a proposal for what a UN Convention on Tax might look like.
In 2019, the Africa Group at the United Nations called for a UN Convention on Tax, and
stressed that the group believed such a convention could help to tackle illicit financial flows. This document contains a proposal for what a UN Convention on Tax might look like, produced by the European Network on Debt and Development and is supported by the Global Alliance for Tax Justice.
Tax-related illicit financial flows, including tax evasion and avoidance, are global problems and require global solutions. And a key part of the purpose of the UN is to provide such solutions.
The proposed Convention on Tax would:
- Create an inclusive global tax body. In the form of a Conference of the Parties, the Convention would create a global tax governance structure where all countries can participate on an equal footing. This is unlike the situation today, where decisions on global tax rules are made in different types of bodies where especially developing countries are not able to participate on an equal footing.
- Strengthen the global fight against illicit financial flows, including tax avoidance and evasion. The Convention would combat illicit financial flows by increasing transparency and cooperation between governments, and by creating more coherent and less complex global tax rules and standards.
- Promote fairness towards developing countries. The proposed Convention seeks to replace existing tax standards and rules that are biased in favor of richer and larger countries. Instead, the proposal aims to introduce a system that fully includes the interests, concerns and needs of developing countries.
- Create strong links to development, human rights, equality and environmental protection. The Convention aims to promote progressive tax systems, and link global tax governance and other governmental commitments and obligations, including those relating to human rights, the UN Sustainable Development Goals, equality and environmental protection.
- Create global coherence and reduce complexity. The Convention is designed to gradually replace the incoherent and highly complex network of bilateral and multilateral tax treaties and agreements, which make up the current global tax system. The aim would be to introduce one coherent overall global framework, and thereby increase the effectiveness of the global tax system and remove opportunities for international tax dodging.
- Replace the failed transfer pricing system. The Convention would mandate a process to replace the existing transfer pricing rules with a new system whereby multinational corporations would be on the basis of their global consolidated profits, with taxing rights being allocated between governments based on an agreed formula in a system that is supplemented by a minimum effective corporate tax rate.
- Increase government accountability and public participation. The Convention would ensure that international decision-making on tax is transparent, participatory and allows citizens to hold their governments to account. This is unlike the situation today, where intergovernmental tax negotiations are often highly secretive and the possibilities for public participation are very limited.
- Ensure a high standard of transparency, while incorporating the interests, concerns and needs of developing countries. The Convention includes the “ABC of tax transparency”, namely Automatic Information Exchange, Beneficial Ownership transparency and Public Country by Country reporting. While a number of such systems already exist in some forms today, the Convention would ensure one coherent global system designed to work for all countries, including developing countries.
- Introduce a framework with a stepwise approach towards more detailed intergovernmental agreements. The Convention would be a framework convention, which would introduce the basic structures, commitments and agreements, and then allow for more detailed elements to be developed over time.
- Does not force countries to accept controversial dispute resolution mechanisms. The Convention would not require countries to commit to controversial mechanisms such as binding arbitration. Instead, the Convention would have a strong focus on dispute prevention, which would reduce the need for dispute resolution. New mechanisms for resolving disputes could also be negotiated under the Convention over time, through the inclusive and transparent decision-making processes foreseen under the Convention.