The aim is to help countries around the world promote economic growth and achieve Agenda 2030 for Sustainable Development and its 17 goals.
Here’s what you need to know about the current UN tax convention and what it means for people around the world:
Why is a new convention important?
The United Nations Tax Convention represents a major shift in the approach to international taxation, with the potential to significantly impact the structure of the global financial system and the way tax dollars are used for the public good.
That is why the United Nations Special Committee drafting the terms of reference for a United Nations framework convention on international tax cooperation concluded second session by consent a package guidelines for the new treaty, taking an important step towards building a legitimate, fair, stable, comprehensive and efficient international tax system.
More comprehensive and effective international tax cooperation is essential to help countries respond to current tax-related challenges, from digitalization to the global operations of large multinational enterprises, as well as to mobilize domestic resources and use tax policy for sustainable development.
Increased investment in solar, wind, hydropower and biomass will be essential to reduce global dependence on coal and oil.
What will the UN tax treaty cover?
According to the Special Committee’s terms of reference, a United Nations framework convention should establish an inclusive, fair, transparent, effective, equitable and high-performance system for sustainable development.
This includes using methods that contribute to achieving sustainable development in three dimensions: economic, social and environmental.
In addition, the framework convention should include commitments to achieve its objectives, from fair taxation of multinational corporations to tackling tax evasion and avoidance by high-net-worth individuals – and ensuring their effective taxation in relevant member states.
Two legally binding protocols should also be developed in conjunction with the framework convention, including one addressing the issue of taxation of income from cross-border services in an increasingly digital and globalised economy.
How can a UN tax treaty help the Global South?
A comprehensive tax cooperation system can properly address the challenges of raising domestic resources to enable all countries to finance and promote policies consistent with the 17 Sustainable Development Goals (Sustainable Development Goals).
“Only a fully inclusive international tax system is legitimate and effective,” Junhua Li, Under-Secretary-General for Economic and Social Development, said at the opening of the Special Committee meeting.
A global tax convention aims to ensure that large multinational companies pay their fair share of tax, no matter where they operate, and is expected to generate significant additional tax revenues for many countries, particularly those in the Global South.
“The livelihoods and futures of billions of people depend on governments’ ability to finance basic infrastructure, education, health services and action on climate change,” said Deputy Secretary-General Li.
The United Nations says progress on half of the SDG targets is weak and insufficient.
Is there a consensus on a global tax treaty?
ARE NOT.
Developing countries largely supported this, but some industrialized nations expressed reservations, which was reflected in the vote held in the Special Committee on Friday.
A total of 110 member states voted in favour of the terms of reference for a new treaty, with 44 abstaining and eight voting against (Australia, Canada, Israel, Japan, New Zealand, South Korea, the United Kingdom and the United States).
The United Nations Special Committee drafting the terms of reference for a United Nations framework convention on international tax cooperation has voted in favour of sending guidance to the General Assembly to establish a global United Nations tax treaty.
What are the next steps?
The Special Committee’s mandate will be sent to the General Assembly, which will vote at the world body’s 79th session starting in September.
If adopted, the General Assembly will have the convention and two protocols drafted by a State-led negotiating committee that will meet annually for the next three years. The negotiating committee will then submit the final text to the General Assembly for consideration in the first quarter of its 82nd session, according to the terms of reference.
That means all 193 UN member states could vote to adopt the UN global tax treaty in 2027. The UN treaty would need a two-thirds majority in the General Assembly to pass, after which it would be open for all member states to sign and ratify.
