United Nations Gains Momentum in International Tax Matters, Challenging OECD Dominance

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In a significant shift, member countries at the United Nations have voted to expand their role in international tax matters, posing a potential challenge to the long-standing dominance of the Organization for Economic Cooperation and Development (OECD) in these discussions.

This move comes as developing nations express frustration with the global tax negotiations coordinated by the OECD, based in Paris, especially regarding the distribution of revenues resulting from efforts to curb corporate tax avoidance by multinational corporations.

In 2021, over 130 countries reached a landmark agreement aimed at tackling corporate tax avoidance. However, concerns have been raised by developing countries about the relatively modest revenue they stand to gain from these reforms compared to wealthier nations.

A vote held at the UN on Wednesday saw the adoption of a resolution initiating the process of establishing a more prominent role for the UN in international tax cooperation through the creation of a convention. This measure, championed by African countries, garnered support from 125 nations, primarily low or middle-income countries, including Nigeria, Ghana, China, India, Brazil, and South Africa.

Contrastingly, 48 nations, largely developed countries including EU member states, the US, UK, Japan, and Korea, voted against the measure. Nine nations, including OECD member states Norway, Iceland, Mexico, and Turkey, chose to abstain. Notably, Chile and Colombia, also OECD members, voted in favour of the resolution.

The African Union expressed satisfaction, stating that the fight for the Global South’s inclusion in international tax agenda-setting at the UN had become a reality. It anticipates the development of an effective UN Framework Convention on International Tax Cooperation to mobilize resources for development.

However, an EU official expressed reservations, stating that while EU countries support multilateralism and effective international cooperation in tax matters, the proposed convention might lack the flexibility needed for consensus.

Mathias Cormann, head of the OECD, affirmed the organization’s commitment to implementing the global corporate tax deal and expressed pride in its track record of achieving consensus-based solutions. He emphasized the OECD’s dedication to collaboration with global partners, including the UN, to strengthen inclusivity and foster a fairer international tax system.

Espen Barth Eide, Norway’s foreign minister, explained the country’s decision to abstain, emphasizing the importance of building bridges with developing countries. He highlighted the risk of an increasing divide between the West and the rest and commended the Africa Group for elevating the issue on a global scale.

Last year, 54 African countries successfully brought a resolution to the UN General Assembly, recommending an assessment of ways to enhance the inclusiveness and effectiveness of international tax cooperation, offering three options, including the framework convention. The recent UN vote signals a potential reconfiguration of the global tax landscape, with the UN gaining momentum in shaping international tax policies.