Amid tensions over the war in Ukraine or the dangers of climate change, this week at the United Nations General Assembly there was also talk of another thorny issue: taxation.
Given the paralysis and difficulties experienced by the Organization for Economic Cooperation and Development (OECD) in establishing a minimum corporate tax on a global scale and fighting the plague of tax havens, its secretary general, Antonio Guterres, has taken the initiative to displace this institution and seek a consensual formula in another location. An unprecedented confrontation.
Specifically, Guterres proposes a multilateral agreement. The three options are a UN convention (which would define international standards), a framework convention (which would create a legal context to achieve common rules) or a non-binding agreement (but which would detail joint aspirations).
Guterres would like the UN General Assembly to opt for one of three approaches this month. These days, during the meeting at the Crystal Palace in New York, many countries have expressed their support for this initiative to lead a common tax policy against tax avoidance and evasion. For example, Mexico – a member of the OECD –, South Africa and Cambodia expressed their support.
The OECD has been trying to find a solution for almost a decade but progress is uneven. On the one hand, we have the so-called Base Erosion and Profit Shifting (BEPS) process, which was promoted by the G-20 countries, to determine what are the taxable profits obtained in the territory where the subsidiary of a company is present. multinational, particularly when there are transactions within the same group. Tax engineering practices that are only available to large firms, which are also the ones that earn the most money. To this end, a minimum effective corporate tax rate was introduced to eliminate incentives to transfer profits within the holding company in order to reduce the tax burden.
If we do not intervene, fiscal losses for states could reach 4.4 trillion euros over the next decade, according to calculations by the Tax Justice Network platform. To give you an idea, it is a figure that represents doubling the bill of the Great Recession that took place just fifteen years ago, in the 2007-2009 biennium. The problem is that, according to these sources, 78% of tax abuses take place in the rich OECD countries and their territories and dependencies.
This explains the numerous resistances in ratifying the proposal (just think of European states such as Luxembourg, the Netherlands or Ireland that have very favorable tax treatment for companies).
On the other hand, one of the pillars of the OECD is to introduce taxation of technology multinationals (which in certain countries do not even pay taxes), but in this case the United States, under pressure from Silicon Valley, resists giving the green light. Thus, the projects have been left in dry dock.
Guterres was harsh during his interventions. “Rules developed through the OECD initiative often do not adequately meet the needs and priorities of developing countries and beyond their implementation capacities. Its effectiveness is limited. The expected benefit of these reforms will be minimal, especially when compared to the cost of implementation. These changes will also not appease the long-standing conviction that existing tax treaty rules do not reserve sufficient tax rights for countries hosting multinational companies.”
According to Tove Maria Ryding, of the European Network on Debt and Development (a platform of dozens of civil organizations), “the OECD process was never truly global. Transparent negotiations are needed where countries participate equally. And the UN is the only place where this can be done.”
For his part, Mark Corwin, head of taxation at the OECD, responded that the UN initiative is “disappointing”, “it ignores the impact of the significant and concrete changes of the last decade and it is surprising how it ignores the current collaboration between members of the OECD.
Does the UN have a chance of succeeding? It remains to be seen if it is feasible to reach a consensus among more than 190 countries. But, above all, we will also have to put pressure on the group of less advanced countries that have very precarious tax systems and that are unable to value their great fortunes (often in the hands of a corrupt elite). Money that has traditionally sought safe places in tax havens.
