With formal negotiations on a new UN-led international tax convention kick-starting in New York next month, new research from the International Centre for Tax and Development (ICTD) provides crucial insights into the challenges and opportunities shaping these historic negotiations.

The research paper explores the key conflicts, decision-making dynamics, and pathways forward for such an agreement, which could “shift the balance of power in international tax”, which has historically been dominated by wealthier nations in the OECD and G20.

Championed by the African Group and with broad support among lower-income countries, the UN Tax Convention process aims to address long-standing imbalances in global tax governance.

The analysis, conducted by Dr Frederik Heitmuller, an Associate Postdoctoral Fellow of ICTD, highlights three pivotal areas of debate that will shape the Convention’s progress:

  • Decision-making process: Wealthier nations, largely in the global North, support consensus-based decision-making, while the global South advocates for majority voting, as per UN General Assembly rules.
  • Bindingness of Agreements: Many lower-income countries in the global South support binding rules with enforcement mechanisms, in contrast to the emphasis on preserving national sovereignty by wealthier global North countries.
  • Scope of Substantive Issues: Lower-income countries in the global South propose revisiting international tax standards developed by the OECD and UN Tax Committee, to which several countries in the global North have opposed.

“Because they command a majority in the General Assembly, global South countries can dictate the decision-making procedures and the topics covered by the Convention. But if they stick to a firm position on these matters, the Convention’s output will primarily be ‘by the global South for the global South’, with little participation from the global North,” Dr Heitmüller said.

“Concessions on either procedural rules or substantive topics may be necessary to bring the global North fully on board,” he added.

Against this background, the research outlines three potential scenarios, each with their own pros and cons, for the Convention moving forward:

  • Institution-Building: Deciding against developing binding agreements, which would put the focus on the framework itself more than changes on fundamental tax standards. This could establish the UN as a political body responsible for setting the agenda for existing technical groups (e.g. OECD) and potentially serve as a political counterweight to the G20 but tangible changes to tax revenue collection might be delayed.
  • Alliance-Building: Strengthening South-South cooperation by not compromising on creating binding agreements or selecting which issues to address. This could potentially create a counterweight to OECD-led initiatives and increasing global South countries’ leverage in other negotiations but might also lead to a fragmented international tax system.
  • Consensus-Building: Prioritising to tackle areas with broad agreement, such as environmental taxation, taxing the wealthy, or consumption taxes, which have also been proposed as potential focus topics by global North countries. This could strengthen the UN’s role and pave the way for tackling more fundamental reforms in the future but also risk devoting resources to topics that are not a priority for lower-income countries.

“This is a defining moment for global tax governance,” according to ICTD Research Director Dr Martin Hearson, who leads its international tax programme. “The strategic choices made now will determine whether the UN Framework Convention can achieve its goal of a more inclusive and equitable international tax system.”

To learn more about this research and its implications for global tax policy, read it in full: ICTD Working Paper 218: Scenarios for Negotiating a UN Framework Convention on International Tax.

Dr Heitmüller will likewise discuss his findings next week at a side event of the UN’s intergovernmental committee meeting working on the UN Framework Convention on International Tax. The in-person workshop, entitled Negotiating the UN Tax Convention Protocols’, hosted by the International Institute for Sustainable Development (IISD) and ICTD, will be on 4 February 2025 at the Millenium Hilton New York, One UN Plaza.

See here for more details about the event: ICTD-IISD workshop: Negotiating Protocols of the UN Tax Convention – ICTD

About the UN Framework Convention on International Tax (UN Tax Convention)

In November 2023, the United Nations General Assembly adopted a historic resolution to commence work on a UN tax convention, voted through by an overwhelming majority. By August last year, draft terms of reference were adopted after three weeks of intense negotiations. The negotiation process to establish the framework is set to begin in February 2025 and end in 2027. The UN describes the convention as representing “a major shift in how international taxation is approached, with the potential to significantly impact the architecture of global financial systems and how tax dollars are used for the public good.”

Read more about ICTD’s extensive work on International Tax here: https://www.ictd.ac/theme/international-tax/

Martin Hearson

Martin Hearson is a Research Fellow at IDS, Research Director of the ICTD and the International Tax programme lead. His research focuses on the politics of international business taxation, and in particular the relationship between developed and developing countries. Before joining ICTD, Martin was a fellow in international political economy at the London School of Economics and Political Science, teaching courses on political economy and global financial governance.

Frederik Heitmüller

Frederik Heitmüller is an Associate Postdoctoral Fellow with ICTD’s International Tax Team. His research focuses on policies against corporate tax avoidance, the influence of international norms in the Global South and global tax governance. He is also an independent consultant on tax policy. Prior to joining ICTD, he obtained a PhD from Leiden University, Netherlands, where he investigated the political economy of the BEPS Project in the Global South as member of the GLOBTAXGOV project, and taught courses on international and comparative taxation. He has a master’s degree in political science from Sciences Po Bordeaux and University of Stuttgart.