AIDC Calls for Global South Unity at 2nd Meeting of UN Tax Body

This week, representatives of states from around the world are meeting in New York to negotiate the future of the international tax system. This will be the start of the Second Session of the Adhoc Committee tasked with developing the terms of reference for the forthcoming United Nations Tax Convention following a historic General Assembly vote in November 2023. In that meeting, the South African representative highlighted the significance of the moment:

It is high time that the international community addresses this injustice in global taxing rights that is impoverishing millions, which goes back to the League of Nations, when most Member States were colonies and which has been perpetuated by the monopoly that rich country clubs have held over international tax rule-making.

The rules of the international tax system are not only biased towards wealthy countries but also ill-suited to the modern world, where powerful transnational corporations do business through a web of hundreds of subsidiary companies. Loopholes and outdated principles in these rules make it possible for corporations and the ultra-rich to avoid paying their fair share of taxes, wages, or environmental reparations, as they shift their profits and wealth to tax havens and secrecy jurisdictions. 

Today, countries like South Africa, Namibia or Zambia lose billions of dollars to these illicit financial flows each year, according to modern estimates by the United Nations as well as the Tax Justice Network. These outflows, including the shifting of corporate profits to tax havens, rob developing countries of desperately needed revenue while further enriching the few who sit at the top of multinational corporate empires. It was estimated that South Africa’s losses in 2020 alone could have paid for the salaries of over one million nurses for the same year. It is this staggering scale of corporate corruption, felt by both Global South and North, that has forced governments into recognising the need for reform. 

Over the next two weeks, the representatives at the United Nations will debate the objectives and scope of the forthcoming UN Tax Convention, which is to be established within the next two years. The Global South has long been pushing for discussions on tax reform to take place at the United Nations, where, other issues aside, each country has an equal vote during negotiations. But these efforts have been resisted by the North, who have preferred the Europe-dominated OECD as the main platform for negotiation, relegating the UN to a supporting role. The OECD’s efforts to resolve international tax issues have resulted in major steps forward such as the implementation of a 15% global minimum tax rate, but also show deep biases and have not challenged fundamentally problematic principles in the global tax system. Our joint submission on SA’s Global Minimum Tax Bill, produced alongside the Institute for Economic Justice, discusses the issues with the OECD reforms in detail.

The AIDC has contributed to a number of international civil society submissions specifically to the UN Tax Convention process. In March, we summarised the key problems that a UN Tax Convention should speak to in light of the environmental and socio-economic crises facing the Global South. These included the rearrangement of taxing rights to ensure that profits are taxed where economic activity takes place rather than in tax havens; that multinational corporations are taxed as one entity rather than being treated as a collection of unrelated companies; and the need for greater transparency over multinational company affairs.

In June, as part of the African CSO Working Group, we looked at the draft Terms of Reference produced by the UN Adhoc Committee, recognising the progress made but raising concerns around the language in the text, specifically regarding questions of privacy and transparency, as well as the need for ensuring the equal participation of developed countries. 

We recognise that a United Nations Tax Convention is not a magic wand that can fix the inequities of transnational capitalism. We cannot ignore the many critiques levelled at the Framework Convention on Climate Change process by the environmentalist movement, nor the way in which the genocide in Gaza has exposed the ease at which countries are willing to abandon multilateral institutions and processes when the outcomes clash with their interests. However, the current moment still presents a rare opportunity to win some victories and make some gains in the struggle towards economic justice – so long as we (and our representatives) are willing to fight for them.

We call on the representatives of Global South countries to stand together in negotiating for a progressive United Nations Tax Convention that can deliver fundamental changes to the international tax system. We also call on civil society, trade unions, and progressive organisations to engage with their representatives and hold them accountable. Finally, we express our support for representatives of Global South states in resisting diplomatic pressure aimed at diluting the outcomes of this process. 

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For media enquiries, contact:

Jaco Oelofsen: jaco@aidc.org.za or  +27 84 376 9019

Dominic Brown: dominic@aidc.org.za or +27 81 309 4973