Latest States’ submissions to the UN Tax Convention discussions highlight contrasting approaches to global tax cooperation, with repeated resistance from Global North countries and uneven engagement across much of the Global South. The choices ahead will determine whether the convention actually delivers a fair and effective tax cooperation framework, or misses a once-in-a-lifetime opportunity to address the drawbacks of the status-quo.
By María Emilia Mamberti, CESR’s Research and Policy Lead
As negotiations towards a UN Framework Convention on Tax Cooperation move forward from the November sessions in Nairobi, we’ve analyzed the latest submissions that States made to the process. Recapping, countries are negotiating the Framework Convention plus two early protocols: one on cross-border services, and one on dispute prevention and resolution. The work, led by an intergovernmental Committee, is organized in three workstreams, one for the Framework Convention itself and one for each early protocol. Here, we focus on the latest submissions made by States in connection with the Framework Convention, based on a “template” with suggested text for the convention’s commitments released by workstream I.
Initially, we see significant engagement from member States, with 41 submissions sent. Yet a closer look paints a less encouraging landscape: 18 (44%) of those submissions come from European countries, which have largely argued for non-duplication with current OECD arrangements and for a minimalistic Convention. 10 submissions come from the Africa Group and African States, which champion the process. From the remaining 13 submissions, 3 come from the 8 main blockers of the Convention (Australia, Israel and South Korea); 4 come from Gulf countries; only 2 from Latin America; and the remaining 4 from China, Russia, Türkiye, and Singapore.
While making a submission is not a decisive indicator of a country’s commitment to the process, it is worrisome to see -with the exception of Africa and of countries like Brazil- lack of coordination and ambition from many parts of the Global South (for a discussion on the potential of cohesive, bold Global South leadership in multilateral spaces, see our latest collective work on the G20). The recent news of the OECD agreeing on a “Pillar Two-Side-by Side package”, conceding to the United States pressure and excepting U.S. multinationals from the global deal, reinforces the urgency of moving decisively towards international tax cooperation that is truly global and ensures equal say for all nations.
Overarching trends
A repeated concern relates to the legal nature of the Convention and its commitments. While virtually all countries agree that commitments should be high-level, many European states go further to argue they should be “non-binding”, “non self-executing”, and overall not creating any legal consequence.
These stances are problematic for many reasons. Initially, they unduly conflate high-level (in this context, “not detailed”) and non-binding (“voluntary”) commitments. A commitment can be general (giving a country discretion on implementation), but still carry legal weight. International obligations can be, for instance, positive or negative; of immediate or progressive realization; and carry obligations of conduct or means (to “try one's best”), or obligations of result (to achieve specific outcomes). Yet all of them are binding obligations.
Furthermore, the question of the legal status of the Convention has been resolved at the beginning of the negotiations. In 2023 the UN Secretary General presented member States with three options to address lack of inclusivity and effectiveness in tax cooperation: 1) a multilateral convention; 2) a framework convention, explicitly described as a “legally binding multilateral instrument”; and 3) a simple framework for international tax cooperation, defined as “a non-binding multilateral agenda for coordinated actions”. Since States agreed to negotiate a framework convention, they should refrain from arguing now for a mechanism with no legal implications. In our collective submission with the Initiative for Human Rights in Fiscal Policy we discussed, precisely, the legally binding nature of framework conventions and provided examples of prescriptive language in other UN framework treaties (as framework conventions are already in place for other complex problems beyond tax cooperation, such as protecting biodiversity or addressing climate change).
Secondly, we see strong agreement on the need to promptly define key terms of the Convention. Relatedly, there are calls for more economic and legal analysis and for explanatory notes, coming mostly from European States (which are arguably better placed to facilitate such analysis, given their capacities). The call for background documents illustrates the relevance of a demand civil society has made throughout the process: that the virtual, “private” meetings that States hold in-between sessions are made public, as discussions of those meetings could surely feed into the requested analyses.
Third, we find a demand to clarify the relationship between the Convention and other frameworks and agreements. Beyond well-known issues of non-duplication with existing OECD work raised by some OECD members, submissions reveal a key discussion on the implications of the Framework Convention for existing Double Taxation Conventions. Many North counties argued that the new treaty should not "supersede" existing bilateral agreements. With the opposite view, Rwanda for instance stated that the Framework Convention should be an umbrella that is not subordinated to existing instruments that don't work. Similarly, Tax Justice Network argues that the Convention should allow the review of “existing arrangements when they fail to serve its objectives”, and prevail over conflicting provisions in other agreements. In the absence of an explicit provision in the future Convention, initially an earlier treaty would apply only to the extent that it is compatible with a newer one.
We also see that many countries suggest having a dedicated Exchange of Information article, instead of scattered provisions as the current draft has, in line with civil society’s recommendations. Finally, African countries consistently made the case for a development-centred approach (including capacity building, technical support, data transfer, etc.), and for a standalone capacity building article.
Trends on specific commitments
Allocation of taxing rights
Two main issues come up in connection with the fair allocation of taxing rights. First, whether the relevant article is actually allocating taxing rights, or just enumerating criteria for allocation elsewhere. Some countries argue that the Convention cannot allocate taxing rights itself. Second, there are divergent views on the criteria for allocation that the current draft enumerates. Many developing countries suggest replacing the current reference to "business activities” with "economic activities" (to take a broader approach that for example recognizes value creation and markets as possible basis for allocating taxing rights). Instead, some developed countries claim that the current text disfavors “residence-based taxation" (which normally benefits those countries). They therefore call for introducing an explicit reference to residence in the text, and more broadly for the use of “well-established”, rather than innovative, allocation criteria.
Importantly, Uganda argued that the negotiating Committee should consider “...the proposal from various stakeholders to reform the primary rule for sharing of taxable income from intra-group dealings (the Arm's Length Principle)." Moving away from the Arm’s Length Principle towards unitary taxation based on formulary apportionment, recognizing that multinational enterprises are integrated corporations, is a long-standing demand from civil society organizations.
High Net-Worth Individuals (HNWIs)
While countries largely recognize the relevance of the topic, three repeated concerns emerge here: first, the claim that this is largely a national level, sovereign issue (some States also raise a point on divergent administrative capacities to address tax abuse by the wealthiest); second, the need to agree quickly on a definition of HNWIs; and third, a call for a shorter and much less detailed article than is currently proposed. As conversations on the definition of HNWI progress, standards can emerge to reflect the specific circumstances of different regions. For example, PT-LAC is assessing the effective tax rates paid by different income groups in Latin America, which could inform a regional position on the matter.
Two exceptions to these trends come from Brazil and Spain, which suggested fleshing out -instead of shortening- the commitment on effective taxation of HNWIs. Brazil proposed an addition to “guarantee a fair distribution of the tax burden”. Similarly, Spain proposed that these individuals should not only be taxed effectively, but also progressively (this is, contributing proportionally more). Importantly, international human rights law (a guiding principle of the Convention, according to its terms of reference) has long been interpreted to call for progressive tax systems that work to reduce inequalities.
Illicit Financial Flows
Several Global North countries call for a definition of illicit financial flows, and some raised the concern that the draft text “blurs the distinction between legal tax planning and criminal activity” (which can be blurry in practice!). They consequently ask for language that clearly separates illegal from legal -though questionable- activities of tax avoidance. Here, it’s worth recalling India’s intervention during the last negotiating sessions in Nairobi -strongly aligned with civil society’s position- arguing that the UN has already adopted a formal statistical definition of illicit financial flows that encompasses forms of “aggressive” tax avoidance.
Mutual administrative assistance, harmful tax practices and exchange of information
The common denominator among submissions of Global North countries on these issues is the well-known argument of avoiding duplication, and abiding by the existing work of the OECD. On harmful tax practices, both developed and developing countries further raised sovereignty-related concerns around the draft’s call for tax incentives to “...be substance-based, linked to investment or performance, and not merely profit-based”. They claim that countries should design internal tax incentives freely, and that “profit-based” incentives can be legitimate policy tools. Similarly, some States objected to the reference in the draft to combating harmful tax practices through minimum taxes, which they deem a domestic policy issue.
Finally, on exchange of information a handful of European countries stressed a concern over issues of confidentiality and data protection, referring to regulations in place at the EU level or the principles of minimization and purpose limitation. Regrettably, a few of these submissions still appear to confuse notions of fundamental rights, international human rights, and taxpayers' rights.
As member States discussed when removing the reference to “taxpayers rights” from the initial draft of the Convention’s terms of reference, there’s no international legal codification of taxpayers’ rights, which appear primarily in domestic law. While countries can protect these rights to the extent they wish nationally, States should ensure they do not confuse their local protection of taxpayers rights or the fundamental right to privacy with the broader provisions emerging from international human rights law on taxation. As we’ve discussed extensively elsewhere, international human rights law has followed a traceable and strong evolution in connection to taxation. These developments have been largely anchored around States’ duty to mobilize their maximum available resources for the realization of economic, social and cultural rights contained in core UN human rights treaties (widely ratified by States across regions). As a result, standards on taxation under international human rights law have been connected mostly to socioeconomic rights and the need to promote sustainable development, and not to taxpayers’ individual rights.
Sustainable development
Overall, there’s alignment from States with the proposed text on sustainable development (which is, to say the least, minimalist), with some countries stressing the need to figure out a mechanism to measure and report on progress on the commitment. A notable exception comes from the UK, which noted that while there have been discussions throughout the process on the economic and social dimensions of sustainable development, they are “not fleshed out in this text”. Instead, the UK urged the use of the Sevilla Commitment for text on human rights and gender. In line with several proposals from civil society, the UK proposed adding language for parties to “Ensure that sustainable development efforts respect, protect and promote all human rights and gender equality”, and “incorporate key principles for achieving environmental sustainability, including the Polluter Pays Principle”.
What’s next?
In-person negotiations will resume in New York in early February. This will be a crucial moment, as the core features of the Convention -that will eventually determine its actual impact- take clear shape. It is essential that countries negotiate in their best faith and with an open mind, avoiding the “threats” that we’ve seen in several submissions of not ratifying the treaty or making significant reservations if ambition is raised. As the OECD recognizes how it capitulates before United States’ threats -that exited the Convention process early in 2025-, it is more urgent than ever to ensure countries can cooperate in a free, inclusive and participatory environment that respects each nation’s sovereignty.
Stay tuned to hear our news from New York soon!