The Shifting Landscape Of International Taxation: Developing Countries Seek A Greater Role For The UN

Author: Brett Hurll                                                                                                                                                                                     23 November 2023

The global landscape of international taxation is undergoing a significant transformation, as developing countries intensify their efforts to secure a more prominent role for the United Nations (UN) in shaping international tax policies. This shift is challenging the long-standing dominance of the Organisation for Economic Co-operation and Development (OECD) in setting the fiscal agenda. In this report, we will explore the motivations behind this push, the arguments for and against it, and the potential consequences for global economic stability and development.

The Current State of International Tax Governance

For decades, the OECD has been the primary driver of international tax policy. Its initiatives, including the Base Erosion and Profit Shifting (BEPS) project, have set the standard for global tax rules. However, this dominance has been a source of contention, especially among developing countries who feel that their voices have been marginalized in shaping these policies.

Developing Countries' Push for a Greater UN Role

Developing countries have rallied behind the idea of a more inclusive international tax regime under the UN's auspices. Their motivations are multifaceted. First, they argue that a UN-centric approach would be more democratic and representative, allowing for a wider array of voices to be heard in shaping global tax rules. Second, they contend that such a shift would lead to fairer and more equitable outcomes, with a greater focus on addressing tax avoidance and revenue leakage.

The negotiations within international forums have been heated. The UN Tax Committee has been a focal point for discussions on this matter. Developing countries have put forward proposals to create a new international tax convention that would place the UN at the center of global tax governance. Developed countries, many of which are OECD members, have raised concerns about the feasibility and effectiveness of such a shift.

Arguments For and Against a UN-Centric Approach

Arguments For a UN-Centric Approach:

Democracy and Representation: Developing countries argue that the UN, with its universal membership, is better equipped to ensure that all countries have a voice in shaping international tax policies. They emphasize that decisions should not be dictated solely by a club of developed nations.

Equitable Outcomes: Proponents contend that the UN would prioritize addressing tax avoidance and profit shifting, resulting in a fairer distribution of international tax revenues. This, they argue, would contribute to economic development in low-income countries.

Multilateral Cooperation: Advocates point to the success of multilateral initiatives in addressing global challenges, such as climate change and health crises. They believe a UN-centered approach would enhance cooperation among nations.

Arguments Against a UN-Centric Approach:

Effectiveness and Consistency: Skeptics argue that the OECD's experience and technical expertise in tax matters have led to more effective policies. They question whether the UN can match the OECD's level of expertise and consistency in international tax rules.

Complex Negotiations: Opponents express concerns about the complexity of negotiating tax matters within the UN's framework, given its vast membership and diverse interests. They fear that progress could be hindered by bureaucratic hurdles.

Economic Impact: Some argue that a shift toward a UN-centric approach could disrupt global economic stability by introducing uncertainty into the tax landscape. Businesses might face challenges adapting to a new system.

The Role of Non-State Actors and Historical Precedents

The evolving landscape of international taxation also raises questions about the role of non-state actors, such as multinational corporations and civil society organizations. These entities have historically influenced tax policies, and their positions may be impacted by a shift towards the UN.

Historical examples of multilateral tax cooperation, such as the Double Taxation Conventions and the Multilateral Convention to Implement Tax Treaty Related Measures (MLI), offer insights into the potential effectiveness of a UN-centered approach. The success of these conventions suggests that multilateral cooperation can yield positive outcomes in the field of taxation.

Implications for Global Economic Stability and Development

The potential consequences of a shift towards a more UN-centered international tax regime are far-reaching. The impact on global economic stability and development hinges on the ability of the UN to effectively coordinate international tax policies and ensure equitable outcomes.

While proponents argue that this shift could lead to a fairer distribution of tax revenues and foster economic development in low-income countries, opponents worry about potential disruptions and challenges to established tax norms.

Conclusion

The push by developing countries to secure a bigger international tax role for the United Nations represents a significant reconfiguration of the global tax landscape. This shift challenges the OECD's historical dominance and raises fundamental questions about the future of international tax governance.

The outcome of these ongoing negotiations and the subsequent impact on global economic stability and development will be closely watched by governments, businesses, and civil society alike. Whether the UN can effectively navigate the complexities of international tax cooperation remains a critical question in this evolving debate. The balance between inclusivity and effectiveness in global tax governance will shape the course of international taxation in the years to come.