African countries ask for a UN Tax Convention.
Photo: Silje Ander/Norwegian Church Aid.
According to the World Bank we are seeing the biggest increase in global inequality and poverty since World War II. Entire countries are facing bankruptcy, with the poorest countries now spending four times more repaying debts to rich creditors, than on healthcare. The climate crisis is turning into a full-blown emergency, especially in the global south, and it is hitting the most fragile communities. An austerity wave, accentuated by the COVID-19 pandemic, is weakening countries’ social spending and eroding existing commitments to sustainable development, climate change and humanitarian relief furthering the humanitarian impact on communities worldwide.
We are living in a world where multiple and intersecting crises are reinforcing each other skyrocketing inequalities.
Yet, every year, billions of US dollars in government revenue are lost through tax abuse. Bank secrecy and non-cooperation make the system work for those who want to dodge paying their fair share. In his book “The Hidden Wealth of Nations”, professor of Economics Gabriel Zucman estimated that assets equivalent to 10 % of the World’s GDP are hidden in tax havens.
In 2018, for the first time in history, US billionaires paid less tax than their secretaries (Tax Justice Network, Take Back Control).
Corporations and wealthy elites are fueling global injustice by taking advantage of a system that is imperfect with multiple loopholes for tax evasion.
Financial secrecy, international tax dodging and tax abuse are destroying our prospects for achieving the Sustainable Development Goals, meeting the pledges on climate finance, or preparing for the next pandemic.
We need to fundamentally change how taxes are collected globally. We need to build a system where everyone, individuals or corporations, pays their fair share of taxes.
The current global tax rules are not fit for the 21st century.
Slow progress made until now raises questions about the effectiveness and fairness of the rules that have been put in place. For instance, international tax rules do not require the taxation of multinational companies where their economic activity takes place. This means that countries, where the multinationals operate, lose public income that cannot invest in social spending. Moreover, the rules do not prevent the anonymous ownership of assets and income streams, which means that Tax Havens are making their fortunes by hiding value created in other countries.
The rules-setter, the OECD is a 38-members body. To truly solve a global inequality problem like international tax abuse we need a multilateral and democratic approach overseen by the UN.
In 2022 the 54 members of the African group submitted a resolution to the UN urging member states to begin negotiations on a UN Tax convention and the establishment of a new global tax body.
This bold move could be the beginning of a historic change in international tax rules.
The resolution, although the United States attempted to water it down, received widespread support. The UN Human rights experts welcomed the initiative: “The international taxation system is in urgent need of reform to combat illicit financial flows in line with human rights law and standards, including extraterritorial obligations”.
Following the lead of the African group, the Colombian Finance Minister Jose Antonio Ocampo announced in 2023 a global tax summit in Latin America to advance discussion on a global tax convention.
There is a clear appetite for change and civil society needs to play a key role in this process.
The time is ripe for a fairer international tax architecture to mobilise funds, otherwise lost to illicit activities, to address poverty, climate change and human security.
In September 2023, the UN General Assembly will further discuss the feasibility of beginning a process to develop a new treaty.
A new process for a global tax treaty at the UN presents civil society with a historic opportunity to change the international tax architecture to make sure that the funds recovered from tax abuse and dodging will be used to create a fairer system.
The new convention process will also foster multilateralism which, as UN General Secretary Antonio Gutierrez warned “is under attack from all sides”.
To work, the UN Tax Convention will have to be a legally-binding international instrument aiming at fighting tax abuse and illicit financial flows by establishing common transparency principles and fiscal cooperation rules.
Religious leaders and actors have played instrumental roles in other processes, like the process to ban landmines or cluster munitions, the Paris Agreement and the Jubilee 2000 campaign to cancel debt
It is time we add our voice to the process to establish an international tax system able to meet the challenges of the 21st century and deliver justice for all.
 World Bank. (2022). Poverty and Shared Prosperity 2022: Correcting Course, op. cit.; and World Bank. (2022, October 5). Global Progress in Reducing Extreme Poverty Grinds to a Halt. Press release. https://www.worldbank.org/en/news/press-release/2022/10/05/global-progress-in-reducing-extreme-poverty-grinds-to-a-halt