Concerns have arisen over a proposed universal tax cooperation convention aimed at ensuring fair taxation for multinationals, with the U.S. withdrawing from discussions. Jonathan Shrier warned that the initiative could impede nations’ ability to prioritize their tax policies. The UN General Assembly is advocating for a framework convention to foster inclusive tax cooperation, addressing issues of tax evasion and fair distribution of taxing rights. Tax havens are identified as a significant source of global tax losses, impacting developing countries severely.
Concerns Over Tax Policy Implementation
Jonathan Shrier, the American representative, expressed significant concerns, stating that the future tax framework could “unacceptably hinder” nations’ abilities to enact tax policies that prioritize the needs of their citizens, businesses, and workers. On February 3, UN member states commenced discussions on a pioneering “universal” tax cooperation convention, intended to promote fair taxation for multinationals and the wealthiest individuals. However, Washington promptly withdrew from these vital talks.
The initiation of these “historic” discussions, which are set to continue until 2027, has sparked optimism among developing nations, the UN, and NGOs advocating for a more equitable international tax system. Yet, the announcement of the U.S. withdrawal has cast a shadow over these aspirations, with Shrier asserting that the objectives are “in contradiction with American interests.”
He further warned that the anticipated text could “unacceptably hinder” the capacity of nations to formulate tax policies that are beneficial to their citizens and economies. This statement came shortly after the U.S., during Donald Trump’s administration, exited the OECD agreement aimed at establishing a minimum 15% tax on multinational profits.
During the opening session, the newly appointed chair of the negotiation committee, Egyptian Ramy Youssef, highlighted the “moral imperative” behind this tax reform initiative. He emphasized that the billions of dollars lost each year due to profit shifting, harmful tax competition, and illegal financial flows deprive “the most vulnerable countries” of vital resources. Shari Spiegel from the UN Department of Economic and Social Affairs echoed this sentiment, stating that “international tax rules must evolve with a changing world” to be beneficial for all nations and peoples.
The Impact of Tax Havens on Global Taxation
In response to the demands from African nations for representation in the discussions about international tax regulations and a reformed financial architecture, the UN General Assembly endorsed the idea of a “framework convention” in 2023 to ensure that tax cooperation is “fully inclusive and more effective.” The negotiation mandate was eventually adopted at the end of 2024. Among the key principles outlined are ensuring “a fair distribution” of taxing rights, particularly through the equitable taxation of multinational corporations, and “combating tax fraud and evasion” by affluent individuals.
Currently, the OECD largely governs international taxation, often described as “a club of the rich” that imposes its regulations on developing countries, which suffer disproportionate tax losses relative to their incomes. Ryad Selmani from the French NGO CCFD-Terre Solidaire criticized the existing international tax framework, asserting that it is “not effective.” Tove Maria Ryding from the European Network on Debt and Development (Eurodad) added that large multinationals and the wealthiest individuals frequently exploit tax havens, depriving governments of essential resources needed for development and climate change initiatives.
According to the Tax Justice Network, nations collectively lose an astounding $492 billion in taxes annually due to tax havens. Nearly half of these losses (43%) stem from the tax policies of eight nations (Australia, Canada, Israel, Japan, New Zealand, South Korea, the United Kingdom, and the United States) that opposed the future Convention’s terms of reference. As the inaugural session unfolds at the UN headquarters in New York, it will be pivotal in establishing how decisions will be made within the committee—either by consensus, which grants each country veto power, or by majority vote.
On Monday, the European Union advocated for a consensus approach, warning that the 27 member states might refrain from participating in the future Convention if consensus is not achieved. Although predicting the aspirations of the future Convention and the number of participating countries is challenging, some stakeholders hope that discussions will explore potential new tax resources. Countries like France are pushing for the consideration of “global taxes on maritime and air transport” to support climate action, as noted by Sergio Chaparro-Hernandez from the Tax Justice Network. He remarked that “the UN Convention could serve as a vehicle” for implementing these solutions, provided there is inclusive dialogue with all nations involved.