The purpose is to assist countries worldwide in promoting economic growth and achieving the 2030 Agenda for Sustainable Development and its 17 goals.
Here is what you should know about the current UN tax convention and its significance for people across the globe:
A UN tax convention marks a significant change in the approach to international taxation, with the potential to greatly impact the structure of global financial systems and the use of tax revenue for the public good.
Therefore, the UN’s Ad Hoc Committee concluded its second session by approving a set of guidelines for the new treaty, taking a major step towards creating a legitimate, fair, stable, inclusive, and effective international tax system.
Effective international tax cooperation is crucial in enabling countries to address existing tax-related challenges, such as digitalization and the global operations of large multinational companies, and to mobilize domestic resources and implement tax policies for sustainable development.
According to the Ad Hoc Committee’s terms of reference, a UN framework convention should establish a system that is inclusive, fair, transparent, efficient, equitable, and effective for sustainable development.
This would involve 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, such as equitable taxation of multinational companies and addressing 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 simultaneously with the framework convention, including one to address the taxation of income from cross-border services in an increasingly digitalized and globalized economy.
An inclusive tax cooperation system can effectively address the challenges of strengthening domestic resources and enable all countries to finance and promote policies aligned with the 17 Sustainable Development Goals (SDGs).
During the opening of the Ad Hoc Committee session, Under-Secretary-General for Economic and Social Development Junhua Li stated, “Only an international tax system that is fully inclusive will be legitimate and effective.”
A global tax convention aims to ensure that large multinational companies pay their fair share of taxes, regardless of where they operate, and is expected to generate significant additional tax revenue for many countries, particularly those in the Global South.
Under-Secretary-General Li emphasized, “The livelihoods and future of billions of people depend on governments being able to finance basic infrastructure, education, health services, and climate action.”
The majority of developing countries support the convention, but some industrialized nations have expressed reservations, as seen in the vote held in the Ad Hoc Committee on Friday.
A total of 110 Member States voted in favor of the terms of reference for a new treaty, with 44 abstentions and eight nations voting against it (Australia, Canada, Israel, Japan, New Zealand, Republic of Korea, United Kingdom, and the United States).
The Ad Hoc Committee’s terms of reference will be submitted to the General Assembly, which will hold a vote during the 79th session that begins in September.
If adopted, the Assembly will establish a Member State-led negotiating committee to draft the convention and two protocols, which will meet annually for the next three years. The negotiating committee will then present a final text to the General Assembly for consideration in the first quarter of the 82nd session, according to the terms of reference.
This means that all 193 UN Member States will be able to vote on a finalized UN global tax treaty in 2027. The treaty will require a two-thirds majority in the General Assembly to be adopted, after which it will be open for signature and ratification by all Member States.