African states win big as UN approves global tax reforms

FILE: Secretary-General Guterres and AU Chairperson jointly brief press after discussions during the Second AU - UN Annual Conference

NAIROBI, Kenya - The African states have won two decades-long diplomatic struggle for global tax reforms. This comes as the United Nations agreed to embark on a vigorous groundwork for the creation of a new system of international tax cooperation.

The UN approved a resolution on Wednesday to begin talks on establishing a new global tax system that could reign in corporate tax dodging and curb money laundering across the globe.

The resolution was submitted for consideration by Nigeria on behalf of another 54-member African group of states, who are hoping for a greater say in global tax policy — something that has traditionally been the domain of a small group of wealthy nations via the Organization for Economic Co-operation and Development.

“This is a historic win for tax justice and the broader economic justice movement and a big step forward to combat illicit financial flows and tax abuses. Shifting power from the OECD is paramount to end the exploitation and plunder of developing countries.” Global Alliance for Tax Justice’s executive coordinator Dereje Alemayehu said in a statement.

Civil society organizations across the continent have welcomed the approval of the Africa Group’s proposal for inclusive and effective tax cooperation at the United Nations.

The resolution was approved by consensus at the 77th session of the United Nations General Assembly (UNGA) and is the first step towards an inclusive, democratic and transparent process to reform global tax architecture.

For over two decades, developing countries have been calling for an intergovernmental tax negotiation process at the UN, which would allow all countries to participate in discussions and decision-making related to tax on an equal footing.

“Africa Group's leadership has paved the way for starting an inclusive process at the UN to build a fair and effective international tax system. This resolution heralds a great opportunity for all UN Member States to move beyond words to action for the much-needed reforms of the global financial architecture,” explained Chennai Mukumba, Policy Research and Advocacy Manager at the Tax Justice Network Africa (TJNA).

Developing countries are the most affected by corporate tax abuse, which results in the loss of at least $ 483 billion in tax every year, but they are often left out of global tax rules decision-making.

Until now, decision-making on global tax matters has been led by the Organisation for Economic Co-operation and Development (OECD), and over a third of the world’s countries have not participated in the discussions in the OECD’s “Inclusive Framework”.

According to Tove Maria Ryding, Tax Coordinator at the European Network on Debt and Development (Eurodad) said, “Some rich countries are still holding on to the archaic idea that they can keep global rule-making on tax under the control of the OECD - also known as the rich countries’ club.

But today’s vote shows that at the end of the day, they know they cannot stop the development towards inclusive, transparent, and UN-led tax governance, which is already highly overdue.

The OECD-led governance is coming to an end - both because it was deeply unjust and biased in favor of a few rich countries. But also because the OECD has so blatantly failed to stop international tax abuse.”

Alemayehu added, “The resolution went through without a vote, which is indicative of the widespread support for reform in global tax rules. African countries stood together and made historic strides, breaking through the longstanding blockade by the OECD countries. Shifting power from the OECD is paramount to end the exploitation and plunder of developing countries.”

Civil society groups are aware that some challenges lie ahead including difficult negotiations on funding the implementation of the resolution and agreeing on modalities.

Pooja Rangaprasad, Policy Director, Financing for Development at the Society for International Development said, “The post-adoption statements by some developed countries have made it clear that the road ahead will be challenging. However, it is in the interest of all countries to fix an outdated international tax system that is bleeding hundreds of billions of dollars in much-needed resources and public revenue.

The fight continues in holding all our governments accountable to agree to an effective UN tax convention that will ensure wealthy corporations and elites pay their fair share in taxes.”

GAROWE ONLINE