Support for the call by African Ministers of Finance, Planning and Economic Development for a UN Tax Convention

By Tax Justice Network Africa (TJNA) in association with Tax and Fiscal Justice Asia (TAFJA) and Red de Justicia Fiscal de América Latina y el Caribe (RJFALC), members of the Global Alliance for Tax Justice (GATJ)

Over the past several years, Global South countries have repeatedly called for the establishment of an intergovernmental tax body under the auspices of the United Nations to fix the international tax system and lead the setting of global tax standards. Last month this call was reiterated by the Conference of African Ministers of Finance, Planning and Economic Development.

At the conclusion of the fifty-fourth session that was held on 16 and 17 May 2022, in Dakar, the ministers endorsed the resolutions that had been approved by the Committee of Experts. Under the section on ‘Curbing illicit financial flows and recovery of lost assets’ the resolutions included the following:

"The Conference of Ministers: [...] Calls upon the United Nations to begin negotiations under its auspices on an international convention on tax matters, with the participation of all States members and relevant stakeholders, aimed at eliminating base erosion, profit shifting, tax evasion, including of capital gains tax, and other tax abuses."

The endorsement of this resolution by the African ministers of finance, planning and economic development adds to the voices of developing nations that have long called for an intergovernmental tax negotiation process at the UN. For over two decades, the G77 and China have called for ‘Member States to consider the conversion of the United Nations Committee of Experts on International Cooperation in Tax Matters into an intergovernmental subsidiary body of the Economic and Social Council.’, noting their concern that there is “no global, inclusive norm-setting body for international tax cooperation at the inter-governmental level”. Since then, there have been repeated calls by numerous Global South groups and member states for the same. Most recently, G77 and China reiterated this call at the 2022 FfD Forum with the Africa Group in the UN noting “the urgent need to establish a universal, UN intergovernmental tax body and negotiate a UN Tax Convention to comprehensively address tax havens, tax abuse by multinational corporations and other illicit financial flows through a truly universal, intergovernmental process at the UN, with broad rights holders’ participation.”

In February 2021, the report of the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) also called for the international community to initiate a process for a UN Tax Convention.

Illicit financial flows (IFFs) have continued to ravage the world’s economies with developing countries disproportionately suffering the negative effects of the phenomenon, especially in the post-Covid-19 era. The State of Tax Justice 2021 showed that countries are losing a total of $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals. Despite developing nations being disproportionately affected by tax-related IFFs, they have always been left out of rulemaking processes that could offer solutions to address these challenges.

The negotiation of the new global tax rules currently takes place within the Organisation for Economic Co-operation and Development (OECD) Inclusive Framework (IF). Despite its name, the OECD Inclusive Framework is not truly inclusive as over a third of countries are not members of the platform, not all countries have an equal voice in discussions on the reform of the global tax system, and it carries an inherent bias towards the interests of the members of the OECD. At present only half of all African countries are members of the IF and in the most recent Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, only 24 African countries endorsed it, yet it was lauded as a global deal.

Further to this, in a series of recent letters from a group of UN independent experts and special rapporteurs, they expressed concern that Pillar One will ‘will facilitate aggressive tax optimisation strategies and tax evasion’ and Pillar Two will ‘reduce the ability of low and middle-income countries to mobilise sufficient resources to invest in essential public services and to ensure the realisation of human rights’ reiterating the inadequacy of the OECD IF as global rule-making body.

The inadequacy of OECD to set global standards is further revealed in their decisions in tax transparency over the last decade. This includes decisions on the cross-border exchange of information on financial accounts and on the activities of multinational companies that can reveal patterns of tax abuse by individuals and companies, which have been designed in such a way as to systematically exclude lower-income countries from the benefits.

We, therefore, laud the continued efforts of developing countries, and more recently the African ministers, to call for an international convention on tax matters at the United Nations. And even as developing nations continue with these calls, we urge OECD countries whose stance has traditionally been obstructive towards efforts to truly establish a democratic platform for negotiation.

This resolution, if implemented, would move rulemaking on international tax out of the hands of a few rich countries who have determined international tax rules for decades and to the UN. As such, we, the undersigned, support the call of developing countries, and more recently the African ministers, for an international tax convention and an intergovernmental tax body under the auspices of the UN.

A UN tax convention would:

● Promote democratic reforms of the international taxation framework by allowing for genuinely inclusive consultations to ensure that the interests of developing nations are represented.

● Initiate the process of harmonising international tax agreements to eliminate their bias towards developed countries to the detriment of developing countries.

● Foster greater collaboration between governments on tax matters in a fair, transparent and accountable manner. This would also enhance greater coordination and coherence between institutions and ultimately have tax issues administered under one framework.

We, therefore, call upon:

1. Governments from all regions of the Global South to step up South-South cooperation and prioritise their long-standing demand for a universal, intergovernmental tax negotiation process at the UN including articulate express statements of support for the recent call by African ministers for a UN tax convention to build political momentum.

2. Governments from the EU and OECD to recognise that the failures of the current system also defeat their own ability to deliver progressive taxation of income, profits, wealth and capital gains, and to give their support to the start of negotiations on a convention.

3. The Secretary-General of the UN to issue a statement of solidarity with Global South countries and provide steer for a discussion on a UN tax convention at the upcoming 2022 UN General Assembly.

Statement endorsed by:

1.     ActionAid International

221.        Women's Working Group on Financing for Development

222.        World Basic Income

223.        World Economy, Ecology and Development - WEED

224.        Youth for Tax Justice Network (YTJN)

225.        Zambia Tax Platform

226.        Zimbabwe Coalition on Debt and Development (ZIMCODD)

227.        Zimbabwe Cross Border Traders Association

228.        Zimbabwe Environmental Law Association

PRESS STATEMENT

28 September 2022

Reject the OECD/G20 BEPS Tax Deal of the Rich! UN Tax Convention Now!

The Asian Peoples’ Movement on Debt and Development (APMDD) welcomes the support of United Nations Secretary-General Antonio Guterres for calls for a UN Tax Convention, recently reiterated by Finance Ministers in Africa and by civil society organizations across the world.  This is a step in the right direction towards fixing the fundamental flaws of the international tax architecture and upholds the rights of Global South countries not only to their tax and fiscal sovereignty, but also to raise revenues and rebuild economies in the face of  multiple crises that have sharpened under the COVID-19 pandemic. 

A Tax Convention under the auspices of the United Nations accords meaningful participation and representation of Global South countries in the creation of international tax rules, unlike the Base Erosion and Profit Shifting (BEPS) Inclusive Framework being pushed by the OECD and G20. We have long pointed out that the two pillars of this supposedly inclusive framework in reality excludes the concerns and interests of developing countries.

Pillar One of the Inclusive Framework on BEPS accords the right of taxation on excess and non-routine profits largely to Global North countries where large multinational corporations are headquartered, rather than to the countries where the bulk of their labor and assets are located. Pillar Two sets a miniscule global minimum corporate tax rate of 15%, which strengthens the position of wealthy corporations and individuals to lobby their governments to accelerate the race-to-the-bottom in corporate taxation downward from the global average of 25%.

The two pillars of the BEPS framework have been developed and are being pushed by OECD members, many of whom also belong to the G7 and the G20, exclusive clubs of the world’s top economies. The creation of the BEPS framework is fundamentally undemocratic and seeks to impose global tax and fiscal rules only by virtue of the outsized economic influence of its primary advocates. The interests of developing countries and economies are, at best, assumed to be served by the framework, or at worst, deliberately excluded to the benefit of essentially maintaining the status quo within the international tax and fiscal architecture. 

The OECD/G20 BEPS framework amounts to a Tax Deal of the Rich, and it is for this reason that we emphatically reject it and call on governments and civil society around the world to likewise reject it. We, along with a growing number of Global South governments, peoples’ movements, and other civil society actors and organizations, have long argued for a UN Tax Convention as a democratic, transparent, and inclusive alternative process for international tax reform, and it is encouraging that the UN Secretary-General has expressed support for our alternative.

Our call to move towards the adoption of UN Tax Convention is not just a matter of sovereign rights, but a practical matter meant to deal with various forms of inequality on the international level. A UN Tax Convention can pave the way for Global South countries to strengthen their domestic resource mobilization, allowing them to increase funding for critical public services such as healthcare and education, and to support the creation of dignified livelihoods that contribute to national economic growth, the strengthening of living and working standards for ordinary people, and just and sustained adaptation to climate change. 

By engendering conditions to strengthen domestic resource mobilization capacities through a UN Tax Convention, Global South governments can reverse longstanding austerity policies that have deprived billions of people of their economic, social, and political rights, and which have contributed to the various debt crises around the world, most recently in Sri Lanka and Pakistan.

A UN Tax Convention also provides an opportunity for international tax reform that recognizes the complicity of wealthy individuals and large corporations (both national and multinational) in global illicit financial flows. Such entities have long taken advantage of tax havens in the Global North that rob developing countries of their resources and the fruits of their citizens’ labor. IFFs can be comprehensively tackled in negotiations through the strong representation and participation of Global South voices in a UN-sanctioned international convention.

The establishment of a democratic, transparent, and inclusive UN Tax Body through a UN Tax Convention is a matter of great urgency. We applaud the recognition offered by UN Secretary-General Antonio Guterres to convention proposals backed by Global South governments and other stakeholders, and we further appreciate the recognition offered by the Secretary-General to the necessity and ability of Global South countries, particularly those in Africa, to lead the process. The challenge now is to actually convoke the convention.

While the calls in support of the proposal are only getting stronger, it must become even stronger and sharper to ensure that the convention will be held in the soonest time possible, and that any Tax Convention that will be held will accord Global South countries and stakeholders nothing less than the strong voice it rightfully deserves. 

Furthermore, any Tax Convention to be held cannot afford to reiterate or incorporate the two pillars of the OECD/G20 BEPS Framework, but should reinforce the rights of Global South citizens to reap the benefits of their labor and resolve inequalities within their countries. We call on governments to commit to pushing for the immediate convocation of a UN Tax Convention, with the participation of civil society and all stakeholders across the Global South. 

The demand to address inequalities in global tax rules and rulemaking is one of the key tax justice demands raised by movements, peoples’ organizations, and CSOs in the recently concluded Asian Days of Action for Tax Justice for People’s Recovery last 23 to 24 September, during which activities and actions were held in Bangladesh, India, Nepal, Pakistan, and the Philippines. 

Now more than ever, we need international tax reforms that promote welfare and strengthens the human rights of billions from the Global South who have suffered the brunt of the multiple crises worsened by the COVID-19 pandemic. 

Reject the OECD/G20’s Tax Deal of the Rich! 

UN Tax Convention now!

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Note: 
The following photo and video may be used with credit to APMDD:

-Link to photo action in New York during the Asia Days of Action for Tax Justice: : https://www.facebook.com/apmdd/posts/pfbid035LCnFsjCDKMYkbFskrBzrQRTL8TeAvPBijF2wDLdm4ucSRc7fvD2GNjAwboW1eeHl

https://twitter.com/AsianPeoplesMvt/status/1573659686888706048

-Link to a video of APMDD coordinator, Lidy Nacpil, supporting a UN Tax Convention 

https://www.facebook.com/apmdd/videos/468213268567458/

https://twitter.com/AsianPeoplesMvt/status/1573659675027210240

Tax Justice Now, towards Ending Inequalities And Building People’s Recovery and Resilience

What is needed is to decisively address the various dimensions and root causes of inequality and build genuine and transformative peoples’ recovery and resilience. This requires building the essential foundations for states to ensure that people’s basic needs are met especially when natural or man-made disasters strike, and for people, including the most vulnerable, to be better able to prepare for, survive, respond to, recover from crises, and take charge of their lives and future. 

To move toward this direction, the neoliberal tax and fiscal policies which have provided a key foundation for the dramatic rise in inequalities around the world must be rejected. Regressive taxation such as Value-Added Taxes (VAT) and/or Goods and Services Taxes (GST) cannot play a part in a peoples’ recovery, as it impacts the working class and women the worst and severely undermines their resilience. Tax exemptions and cuts for the wealthy and for large corporations both local and international must be repealed by governments. Tax abuses by corporations and the elite and other types of illicit financial flows that drain public coffers of resources for peoples’ needs must be stopped.  Progressive policies that fairly and sharply tax the income and wealth of corporations and the elite – like wealth tax – and must be adopted to accelerate domestic resource mobilization for peoples’ recovery and economic rebuilding. 

Economies around the world must be restructured and reoriented away from servicing the profit-driven agendas of  MNCs and wealthy elites and towards serving people’s basic needs and rights and ensuring that development’s social and economic benefits are distributed equitably. Women’s contribution to economic and social life must be fully recognized and justly rewarded.  A Peoples’ Recovery must seek to socialize and redistribute the often-unrecognized reproductive labor of women. The care and well-being of society should not be borne in private by any single gender, but by all of society.

There can be no such restructuring of economies without the reversal of long-standing austerity policies which have emptied funds for the basic public services of Global South countries. These policies have been forced into being often in order to service onerous debts which find their roots in Global North countries’ exploitation of their former colonies.  Tax abuses by corporations and the elite and other illicit financial flows (IFFs) must be stopped. The fundamental flaws in the international tax architecture and in global tax rulemaking that disadvantage developing countries and impact negatively on the peoples of the Global South must be fixed. Elite and gender biases embedded in national fiscal and tax systems, as well as in the global tax system,  must be corrected.  Ensuring peoples’ recovery and building resilience require thoroughgoing policy and institutional and structural reforms that favor the interests of ordinary people and the planet, not the wealthy. We need fiscal and tax systems that contribute to ending inequalities and building people’s resilience. We need an inclusive and transformative peoples’ recovery! 

This September 23, 2022, we hold the Asian Day of Action for Tax Justice to amplify peoples’ demands from countries across Asia and the Global South for urgent tax justice towards ending inequalities and building genuine Peoples’ Recovery and resilience in the face of multiple crises. 

We demand an end to unjust tax burdens on women and marginalized sectors. It is time for governments in Asia and the Global South to shift the burden of taxation from the poor to the rich. This would entail the enactment of progressive taxes such as wealth taxes as well as effective measures to stop corporate tax abuses and other types of illicit financial flows that rob governments of much-needed revenue for public services. Large corporations, especially multinational corporations, must pay their fair share to the countries and peoples whose natural resources, knowledge and labor (paid and unpaid) are exploited for their profit and wealth accumulation. 

Increased revenue from progressive taxation must be allocated towards financing quality and gender-responsive public services, including those that aim to reduce and redistribute unpaid care work.  Taxing the wealthy and ensuring that corporations pay their fair share without stringent governmental support for public needs means that only the most superficial of inequalities will be addressed.

Finally, we fully recognize the international dimensions of tax and fiscal justice. Reforms at the national level are not enough. We call for an end to inequalities in global tax rules and rulemaking that  continue to favor wealthy countries, corporations, and individuals.   Such inequalities remain blatantly evident even in reform proposals, such as that of the OECD/G20’s so-called “Inclusive” Framework on Base Erosion and Profit-Shifting (BEPS) project, which promotes corporations’ and elite countries’ agenda and which does not serve the interest of developing countries and peoples of the Global South. In handing the right to tax the “excess and non-routine” profits of multinational corporations to their countries of registry and not to those where the bulk of their extraction, employment, and sales occur, and by setting a paltry 15% global minimum corporate tax rate closer to the norm in tax havens than the global average, the BEPS project has amounted to nothing more than a Tax Deal of the Rich. 

No exclusive club of the world’s richest economies can advance a serious agenda of international tax reform given the fact that it is they who benefit the most from the status quo. We eagerly join the growing ranks of Global South governments and civil society all over the world in their call for a UN Tax Convention that addresses the unjust tax and debt relations between developing countries and the developed. It is the right of all countries, especially those of the Global South, to advance their interests through inclusive and transparent channels. Such a convention must give way to a truly inclusive, democratic, transparent, and accountable inter-governmental mechanism for tax governance, or a UN Tax Body, where all countries stand on equal footing. 

At this crucial junction in the economic, social, and political life of our world, heeding the call for systemic changes in our global tax and financial systems and economies is needed more than ever. To advance a Peoples’ Recovery is not only just, but practical. Pervasive elite biases within these systems have left billions of women and other marginalized gender identity groups (LGBTQI+), workers, youth and students, and others vulnerable to the ravages of the COVID-19 pandemic, while large corporations and wealthy individuals have consistently made record-high profits, especially over the past two years. These starkly political inequalities have played no small part in the unfolding tragedies of Global South countries like Sri Lanka and Pakistan, with many more in danger of following suit if changes are not made now.

Make Taxes Work for People and Planet!

Tax Justice Now for People’s Recovery! - TAFJA

Tax justice groups in Asia are calling for a Day of Action on Tax Justice to be staged on September 23 to demand changes and reforms on taxes and fiscal system with Jeannie Manipon of The Asian Peoples’ Movement on Debt and Development (APMDD) saying that “national tax systems are biased in favor of MNCs and the elites. We can also see the similar pattern in the international tax system”, emphasizing that a progressive mechanism must be put in place in order to allow the removal of the backwards tax and fiscal system.

In an online press conference organized by the Tax and Fiscal Justice - Asia (TAFJA), the combined and resounding messages of speakers  stressed that regressive tax policies exemplified by VAT and GST impact women, workers, farmers and other marginalized sectors the most and severely  undermine their capacities to prepare for, respond to, survive recover and rebuild when crisis or natural disasters strike. Regressive tax systems, with their elite and gender biases are legacies of colonialism, part of systems that enable countries of the Global North to extract wealth from the Global South.  

As the 77th United Nations (UN) General Assembly meets on 13-27 of September 2022, TAFJA and APMDD leaders called attention to the impacts of flawed fiscal and tax systems  on  the marginalized and common citizens. “While people are dying [in Pakistan], taxes from basic utilities are rising. The total price of electricity has tripled [amidst the emergency]” says Farooq Tariq of the Pakistan Kissan Rabita Committee. He mentioned that a Pakistani said that there are no relief efforts underway to alleviate the common people. “Regressive tax policies disproportionately burden women and disempowered, disadvantaged families” expressed by Vidya Dinker of the Indian Social Action Forum. Further elaborating that only when unfair tax burdens are removed from women and the marginalized can society move a step forward in eliminating poverty and inequality. 

“In the Philippines, one public official, has already admitted that the cost of living of an ordinary worker is PhP42,000 (USD734) despite the reality that workers only receive about one-third of the cost of living expected by the public official” stated by Luke Espiritu of the Bukluran ng Manggagawang Pilipino or Solidarity of Filipino workers. Moreover, he said that taxing the billionaires even just 1% of their total assets, the Philippine government could come up with PhP1 trillion (USD17,469,384,000.00), a huge amount the state could use for a better delivery of social and public service.

“The same countries that give away a lot of money are the same countries that need it the most.” explained tax lawyer Tony Salvador of the Third World Network regarding the countries in Global South providing tax holidays for corporations while laborers continue to suffer from the burden of heavy taxation.

“While COVID-19 has brought further inequality, brought about extreme poverty, income loss, unemployment, and the suffering of the workers, the super rich have increased their wealth repeatedly during the pandemic” said Ah Maftuchan of The Prakarsa, citing that only if the people uphold the redistributive property of wealth taxing, can the society solve poverty and extreme inequality. 

Sudhir Shrestha of the South Asia Alliance for Poverty Eradication explored the issues of taxation in Nepal pointing out that taxation policies in Nepal are made or drafted based on the interest of limited groups, instead of the general public, asking the question: “who is really running the government, the parliament or the businessmen?” 

Dereje Alemayehu of the Global Alliance for Tax Justice (GATJ) criticized the “tax deal of the rich” being pushed by the Organisation for Economic Cooperation and Development as this proposition will only allow for further exploitation of the Global North countries of Global South countries. Instead the Global Alliance for Tax Justice together with its network members, including TAFJA and APMDD,  calls on the UN to spearhead the return of international tax rules under UN auspices and the formation of a UN tax convention and body. Jeannie Manipon of APMDD called on governments and the international community to adopt a progressive tax and fiscal systems would not be prone to abuse by the elite and that would truly serve people’s needs.

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