A landmark victory for global tax justice

The adoption of the Terms of Reference (ToR) for the UN Tax Convention is a game changer for international tax rules. It marks a historic step forward in the global fight for tax justice, offering the potential to transform how multinational corporations and high-net-worth individuals are taxed. For the first time, we have a globally inclusive framework led by the UN that aims to establish equitable taxation, tackle illicit financial flows, and enhance international cooperation on tax matters. This is a significant shift away from existing systems that have long favored the interests of wealthier countries and powerful corporations.

This is a victory for Public Services International (PSI) and its allies, who have been campaigning tirelessly for a fairer tax system that benefits everyone, not just the super-rich. PSI has played a critical role in this process, providing essential input and comments that helped shape the ToRs and secure their approval. Despite significant obstacles from richer countries and their corporate lobbyists, these efforts have ensured that states will need to address tax avoidance by the super-wealthy and tax-dodging corporations. This is not just a technical achievement; it represents a collective victory for trade unions, civil society, and the Global South in the fight against inequality and for a fairer world.

 UN voting breakdown

• 110 in favour: these countries, primarily from the Global South, supported the ToR to enhance tax cooperation and ensure fairer global tax practices.

• 8 against: Australia, Canada, Israel, Japan, New Zealand, the Republic of Korea, the United Kingdom, and the United States voted against the ToR. The United States expressed concerns over the lack of global consensus and the procedural aspects of the negotiations.

• 44 abstentions: Notably, the EU shifted its previous opposition, choosing to abstain. The group nevertheless cited concerns about the process's inclusiveness and transparency.

What is included in the Terms of Reference?

The five-page ToR, concise for a UN document, outlines priority areas for the upcoming negotiations:

• Fair allocation of taxing rights: this includes the equitable taxation of multinational enterprises and has been a key objective for labour movements to ensure MNEs pay taxes where value is generated.

• Addressing tax evasion and avoidance by high-net worth individuals: this will likely build on the work for a wealth tax delivered to the G20 by Gabriel Zucman

• International Cooperation: aims to contribute to the achievement of sustainable development

• Effective mutual administrative assistance in tax matters: this includes international cooperation and information exchange between tax authorities.

• Addressing tax-related illicit financial flows, tax avoidance, tax evasion and harmful tax practices

Effective prevention and resolution of tax disputes

Protocols: The ToR includes provisions for protocols to be developed alongside the Convention. Protocols are legally binding instruments that are connected but distinct from the Convention to address specific tax issues. Countries can agree to the main UN Tax Convention without agreeing to all the protocols. Two protocols are included:

• Taxation of cross-border services in global digital economy which could include digital services taxes which target large digital service providers like Google, Facebook and Amazon.

• One of the following options, to be decided during the negotiations:

  • Digitalised economy (unclear the distinction with the first protocol)

  • Tax-related illicit financial flows

  • Prevention and resolution of tax disputes

  • Tax evasion and avoidance by high-net worth individuals

Excluded elements

• Some climate-related tax measures were notably excluded from the ToR. The duplication with the existing UN Convention on climate change was one reason behind a reluctance to include the need to cooperate on climate-related tax measures

• The decision-making process for the convention is not detailed in the ToRs and will form part of the wider negotiations. Whether the vote of this Convention is carried out on a consensus-based approach or by majority is a key contention. Many Global North states advocate for consensus to ensure decisions are broadly supported and minimise opposition.

What’s next?

The ToR will now be sent to the UN General Assembly for a vote in September 2024. If adopted, a Member State-led negotiating committee will draft the Convention and its protocols. Negotiations are likely to begin in early 2025 and last until late-2027. Three negotiation sessions are expected each year.

We can expect the UN to vote on the Convention from late-2027 to 2028.

This negotiating committee will be instrumental in shaping the convention, making it imperative for civil society groups, including trade unions, to strategically engage in the negotiation process.

How the labour movement can push forward with UN tax momentum

As we move forward, it's essential for trade unions in countries that opposed or abstained from the vote to advocate for greater accountability and transparency within the UN as a global tax body. These unions should focus on raising public awareness and fostering debate about the importance of a fair and effective starting point for global tax reform.

Trade unions in countries that have already supported the convention, especially in the Global South, have played a vital role in reaching this point. Going forward, it's crucial to maintain close coordination among all delegations to ensure a unified stance in negotiations, strengthening the collective voice for tax justice.

For all unions, the Network of Unions for Tax Justice (NUTJ) amplifies labour voices and facilitating timely coordination. This is an informal network that provides technical support, advice and coordination between unions around the world. If your union is not a member, please get in touch.

While this UN initiative is a historic step, we must acknowledge that tangible outcomes may take years. Thus, the fight for tax justice must continue at the national level. This includes engaging in corporate campaigns to expose tax dodging and encouraging governments to initiate reforms domestically.

To assist in these efforts, PSI and NUTJ offer briefs and training on identifying profit-shifting and other tactics used by corporations to avoid fair taxation. By staying engaged at both the international and national levels, hold our governments to account and, where needed, push them to act to strengthen our national tax systems to deliver much needed revenue for public services. Without genuine international cooperation, the rich and the super-wealthy will also find a way of avoiding paying what they owe. With a strong UN convention, our governments will have tools to crack down on tax avoidance at home whilst preventing capital flight abroad.