“The G20 Summit in Bali is blocking any progress towards the negotiation of a UN Tax Convention that would address the issue of corporate tax abuses and illicit financial flows”, pronounced Lidy Nacpil, coordinator of the Asian Peoples’ Movement on Debt and Development, after the G20 released its Outcome Document November 16.
“The G20 continues to refuse to listen to civil society movements that are demanding global norms and standards on tax cooperation that respects all countries’ sovereignty, strengthen countries’ capacities to raise revenues to deliver public services, climate action, sustainable development and human rights commitments, and pave the way for an inclusive UN Tax Body,” Nacpil continued. “It is holding on to the fundamentally undemocratic Tax Deal of the Rich.”
The G20 has been pushing for the OECD Inclusive Framework on BEPS, a so-called “Two-Pillar Solution” which has been heavily criticized as a “Tax Deal of the Rich.”
On November 15, the first day of the G20 Summit, APMDD delivered a strong message to G20 leaders, calling on them to refrain from blocking any progress towards the negotiation of a UN Tax Convention that would effectively address corporate tax abuses and establish norms and standards on tax cooperation that respects all countries’ taxing rights via actions in front of their embassies in Metro Manila as the G20 Summit opened in Bali, Indonesia, 15 November 2022.
Open letters were delivered and discussed with embassy representatives. The first stop was the Embassy of Indonesia which holds the Presidency of the G20 until December 2022, followed by the Embassy of Brazil and finally the Consular Office of the Embassy of India. See the Open Letter to the government of Indonesia here.
APMDD called attention to the arrogation of international tax system rulemaking by the world’s largest economies through the OECD/G20 Base Erosion and Profit-Shifting (BEPS) framework, an effort which APMDD denounces as fundamentally undemocratic, illegitimate, and biased towards the interests of countries, corporations, and wealthy individuals already benefiting from status quo tax rules.
Instead of the G20-G7-OECD Tax Deal, the Asia-wide civil society network calls for the immediate adoption of a UN Tax Convention and an intergovernmental tax mechanism under UN auspices, proposals which have been advanced again most recently by finance ministers in Africa, as well as by the G77 and China. Reiterating the call of African finance ministers, UN Secretary-General Antonio Guterres said that a “legitimate global system of laws” that is “consistent with the principles set out in the United Nations Charter” is needed to stop illicit financial flows (IFFs) and end tax abuses, especially in developing countries.
APMDD coordinator Lidy Nacpil said that “a UN Tax Convention is needed because multinational corporations exploit the different national tax systems on a global scale, and we need global governance in order to reign in and address the tax abuse of multinational corporations.”
While the OECD and G20 present their BEPS framework as an inclusive project, APMDD has long pointed out that the project’s two pillars will deprive Global South countries of their ability to mobilize domestic resources for their sustainable development while benefiting Global North countries and corporations. According to APMDD, the BEPS framework amounts to a Tax Deal of the Rich.
Pillar One hands the right of taxation on the excess and non-routine profits of large multinational corporations (MNCs) to countries where these corporations are headquartered, rather than where their assets are located. This will rob developing countries of their just share of tax revenue, while solely benefitting the Global North countries where MNCs are based. Furthermore, this will exacerbate IFFs by MNCs that can simply declare a larger share of their profits as non-routine.
Pillar Two of the framework aims to advance a global minimum corporate tax rate of 15%, a drop from the 25% average corporate tax rate of developing countries. This represents a massive cut in tax revenue for Global South countries at a time when funds are much needed to finance critical public services, people’s recovery from the COVID-19 pandemic, and to address the risks, vulnerabilities, damage and losses brought about by the climate crisis. Furthermore, this will likely precipitate a race to the bottom amongst developing countries as pressure mounts for them to cut taxes in line with the BEPS framework.
The OECD/G20 BEPS framework is largely a project of the world’s largest economies and is unrepresentative of the international tax reform demands of developing countries and peoples’ movements around the world. A UN Tax Convention, negotiated with universal and equal participation of all UN member states and with civil society participation can pave the way forward towards global tax rules that will enable all countries, but especially those in the Global South to strengthen domestic resource mobilization and other capacities to meet sustainable development goals, human rights obligations, and to fast track peoples’ recovery. The so-called “Two-Pillar Solution” peddled by the BEPS framework will not fix the fundamental flaws of the current international tax system and will only serve to exacerbate inequalities within and between countries.
According to Vidya Dinker, head of the Indian Social Forum and chair of APMDD’s Women and Gender Working Group, “the G20 should act on demands to reform the international tax architecture by supporting calls to start negotiations for a United Nations Tax Convention that would include the establishment of the UN Tax Body, with a voice and mandate from all countries. A new tax system is very much needed.” Dinker, who added that “the G20 must not block the process of adopting a UN Tax Convention,” is an activist leader in India who has helped steer civil society efforts to advocate a comprehensive tax justice agenda in political dialogues with G20.
APMDD’s public actions at the Embassy of Indonesia, the Embassy of Brazil, and the consular office of the Embassy of India were in solidarity with efforts by other peoples’ movements and civil society networks in Asia and beyond towards building up the call for the immediate adoption of a UN Tax Convention, and sending a strong message to G20 countries as they meet in Bali under the Presidency of Indonesia.
In 2023 India takes over G20 Presidency and in 2024, Brazil will be at G20’s helm. Several G20 countries have historically been known to block efforts of developing countries to push for reforms in the international tax architecture that would make it more responsive to developing countries’ interests and more effective in curbing corporate tax abuses and illicit financial flows.