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OECD’s tax deal may discriminate on the basis of gender and race - UN experts warn


Photo: © Hervé Cortinat / OECD

Following a joint submission by CESR and allies, UN Experts have weighed in on the potentially discriminatory impact of the OECD’s Two Pillar Solution on the grounds of “gender, ethnicity and race,” warning that it could widen inequality both within and between states. This historic intervention pressures OECD member states to support the intergovernmental process to establish a global tax treaty under UN auspices.

By Ohene Ampofo-Anti, Program Associate at CESR.

This historic intervention comes hot off the heels of increased momentum to shift global tax standard setting from the OECD to the UN. On 22 November 2023, countries voted by a landslide majority to approve a resolution brought forward by the Africa Group to begin working towards the new framework convention – despite a concerted effort to block the vote by the US, UK, and EU, who were publicly accused of negotiating in bad faith. The resolution was adopted with 125 votes in favor, 48 against, and nine abstentions.

In December 2023, CESR and its allies, including Tax Justice Network (TJN), Centro de Estudios Legales y Sociales (CELS), Movement Law Lab, Minority Rights Group International, and ESCR-Net, made a joint submission to several UN special procedures, including the Independent Expert on debt and human rights, the Special Rapporteur on the right to health, Special Rapporteur on the right to food, and the Special Rapporteur on Racism. 

In its 2023 State of Tax Justice report, Tax Justice Network estimated that at the global level, some US $480 billion of tax revenue is lost to abusive international tax practices each year. The essence of our submission was that the OECD’s Two Pillar Solution undermines the taxing rights of countries in the Global South by reducing their fiscal space to resource fundamental rights such as healthcare, education, and social security. In addition, we argued that if implemented, the Two Pillar Solution will have racially discriminatory impacts by widening inequalities between former colonial powers and their former colonies. This, we argued, would reproduce the legacies of colonialism and slavery and undermine the achievement of substantive racial and gender equality both within and between states.

Our submission's second and complementary objective was for an outcome that fuels support for the ongoing intergovernmental tax process, which could see tax standard setting finally shift from the OECD to the United Nations after more than 60 years. As the UN Secretary-General’s report illustrated last year, global tax setting needs to be inclusive, democratic, and participatory whilst being responsive to the distinct needs of Global South countries. In addition, a truly global tax treaty needs to be rooted in and seek to give effect to the full range of human rights - civil, political, economic, social, cultural, and environmental. 

We called on the UN special procedures to intervene by submitting a communication to the OECD and several OECD member states who are most responsible for abusive tax practices and illicit financial flows: France, the Netherlands, Luxembourg, Switzerland, the UK, and the US.

The remedial steps we requested were to:

1) Call on the six OECD member states to take corrective action, including through: supporting the development of a genuinely inclusive and comprehensive (i.e. including taxation of the digital economy) United Nations Tax Convention; and 

2) Call on the OECD to conduct a human rights impact assessment, including a gender and racial impact assessment, of the OECD Inclusive Framework and make this assessment publicly available.

What did the UN Experts say?

While UN treaty bodies have long acknowledged the impact of abusive tax practices on fiscal space and resourcing economic and social rights, it has been rare for the racially discriminatory impact of such practices to be acknowledged. The intervention is historic for noting the neocolonial nature of the OECD’s tax deal and the link between international taxation and the unaddressed legacies of slavery and colonialism. The experts cautioned that “In reifying patterns of economic extraction with historical origins in systems of colonialism and slavery, the deal has the potential to prejudice the predominantly non-white nations of the Global South.” 

In our submission, CESR and its allies emphasized the neocolonial aspects of the OECD’s governance of international taxation. For example, the manner in which abusive international tax practices have been policed and enforced by the OECD is unmistakably racialized. For instance, in the year 2000, the OECD published a “blacklist” of states maintaining fiscal regimes that facilitate abusive tax practices, yet countries like the US, UK, and Switzerland were conspicuously absent despite their central and outsized role in the same. At the same time, the OECD pursued Liberia, a country whose tax policies pail in comparison.

This acknowledgment of the structural - and therefore root causes - behind why billions of people (especially the most vulnerable segments of the population) do not enjoy the rights to an adequate standard of living, health, education, and social security is even more powerfully captured by the UN experts remarks that “the strengthened neoliberal turn of the past forty years, reflected in the policies of international economic institutions and national Governments, has demonstrably increased poverty and inequality both between and within nations.”

The UN experts must be commended for also calling for structural reforms that target the root causes of poverty and inequality. Notably, they called for “feminist and human rights-based approaches” that “enable the creation of progressive, redistributive global financial governance frameworks.”

The UN experts called upon the OECD to conduct a human rights assessment of its proposed tax deal. In addition, they called upon the OECD and its member states to support ongoing efforts for UN-led global tax reforms, which represent “a once-in-a-lifetime opportunity to fix discriminatory and regressive international tax rules.”

Where to from here?

The poly-crisis we are in, which has a disproportionate impact on countries in the Global South and marginalized communities around the world, requires an unprecedented marshaling of resources. CESR and its allies believe that a global UN Tax Convention is one of the essential ingredients to create a rights-based economy to secure a dignified life for all whilst averting ecological collapse. The budget for the intergovernmental panel for a UN-led tax process has been approved, and in the coming months, its terms of reference will be established. Undoubtedly, the OECD and powerful member states will continue obstructing efforts to dilute their influence and power. Now more than ever before, it is essential that we bridge siloes between movements fighting for tax justice, debt justice, and climate justice and rally around the Africa Group’s push for a UN-led tax process. If we do not seize this historic moment, it may soon be too late.