The United Nations last week published a draft resolution, tabled by Nigeria on behalf of the Africa Group, calling for a United Nations convention on international tax cooperation. This is a welcome step towards fixing the outdated international tax framework which enables corporations to get away with stashing $311bn on tax havens each year by abusing tax rules first developed almost a hundred years ago.
In the South African context, additional revenues are needed more than ever. The coming Medium Term Budget Policy Statement threatens to outline serious cuts to spending at a time when state departments have already been issued a hiring freeze on the appointment of essential staff like nurses and teachers. Beyond vital tax losses, the AIDC’s research has also shown how these illicit financial flows deprive workers of potential improvements in wages and working conditions, and contribute to the failure of mining companies to fulfil their obligations of community development under the Social and Labour Plans.
The AIDC has also been critical of the state of international tax reform. In a report produced with international partners last year, we noted that the outdated international tax framework is at the root of enabling the trillions of Rand in corporate illicit financial flows each year. Moreover, we have called attention to the fact that the current reform process has been driven and dominated by the OECD, a so-called “rich countries’ club” that is not transparent or democratic and instead prioritises the interests of the Global North. This is why the current OECD proposal for a global minimum tax will not meaningfully address the scale of the problem for countries in the Global South.
The new UN resolution, under the title Promotion of Inclusive and Effective International Tax Cooperation at the United Nations, builds on the report produced by the United Nations Secretary-General first released in August. The Secretary General’s report noted the state of play with regards to international taxation, and put forward three options for states. Of these, the strongest option was the establishment of a United Nations convention on taxation – similar to the United Nations Framework Convention on Climate Change which means at the yearly Conference of Parties (COP). This is the option supported by the Africa Group’s resolution, and it would signal a fundamental shift from the OECD to the UN as the rule-making body on tax matters.
While acknowledging some of the limitations of the United Nations, it is our belief that such a Convention on Taxation could produce a more equitable and effective reform process that will allow us to “Stop the Bleeding” of critical revenues due to illicit financial flows and profit shifting from large corporations. The resolution will be discussed in mid-November, and we call on the South African government to express its full support.
For more information, contact:
Jaco Oelofsen: 084 376 9019
Dominic Brown: 081 309 4973