UN tax body to go ahead after EU, US and UK fail to defeat it

The international community will move forward with plans to establish a UN convention to set global rules on tax and illicit financial flows after a campaign led by the EU, United States and UK failed to kill off the plan. 

Following a debate and vote in New York on Wednesday (22 November), a resolution on the ‘promotion of inclusive and effective international tax co-operation’ and a UN tax convention, tabled by Nigeria, on behalf of the Africa group at the UN, was passed by 125 votes to 48 on Wednesday.  

The EU27 formed the bulk of the 48 countries which voted against establishing a UN tax convention. The United States, UK and Japan were also among those to oppose the convention. 

At a meeting earlier this month, EU finance ministers recommended that the bloc support “working at the UN on a non-binding multilateral agenda”.

They also concluded that a UN tax body “would risk leading to duplicate ongoing or completed international work linked to the existing global tax framework… This would be time consuming for all jurisdictions”. 

Earlier, an amendment by the UK to make the process legally non-binding, which was supported by all EU countries and the United States, was defeated by 107 votes to 55. Wealthy states, led by the US, UK and EU have been accused of blocking the process during intense negotiations over the past month. 

The convention will now be organised in the coming months and is expected to report back with proposals in 2025. 

Long-standing question

The question of who sets the rules on tax at the global level has become hotly disputed in recent years. 

African states argue that since they are among the biggest losers from illicit financial flows and tax avoidance, global tax policy should be set at the UN level rather than by the 39-member Organisation for Economic Co-operation and Development (OECD).

Nobel laureate Joseph Stiglitz was among a group of international economists backing the demand.

While the Paris-based OECD has spent years working on how multinationals pay tax, its 39 members do not include any African or developing states, prompting critics to deride it as a ‘rich man’s club’. 

Critics of the UN convention argue that the multilateral organisation does not currently have the resources or expertise to set tax rules and that the new process risks slowing the progress that has been made by the OECD. 

EU countries lose over $130 billion a year to tax havens. The bloc maintains a ‘black’ and ‘grey’ list of countries that do not apply international rules on bank information exchange, money laundering and taxation.

However, civil society groups have pointed out that several EU countries are themselves guilty of harbouring tax havens. In its annual country recommendations as part of the European Semester this year, the European Commission urged Luxembourg and Malta to take measures to tackle aggressive tax planning. 

[Edited by Nathalie Weatherald]

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