Countries pass ToR in readiness for tax justice treaty

A total of 110 Member States on Friday voted in favour of the terms of reference (ToR) for a new treaty on the United Nations Tax Convention, with 44 abstentions and eight nations voting against it.

The vote demonstrated that there is no consensus on tax treaty. Developing countries largely supported it, but some industrialised nations expressed reservations, as reflected in the vote held in the Ad Hoc Committee.

Australia, Canada, Israel, Japan, New Zealand, Republic of Korea, United Kingdom and the US voted ‘No’.

Prior to the vote, civil society organisations celebrated and drummed up support for the draft as a significant milestone in the pursuit of a more equitable global tax system. 

The draft was being praised for its potential to reshape international tax rules, especially in favour of developing nations.

Greenpeace Africa’s Political Advisor Fred Njehu, highlighted the importance of the moment, stating that the release of the draft marks a historic moment in the global effort to democratise international tax governance.

“It is a testament to the tireless advocacy of countries from the Global South, who have pushed for a fair and transparent system that reflects the needs of all, not just the wealthiest few. We call on all governments to support this draft and ensure that it is adopted without delay," Mr Njehu said hours before voting started.

Negotiated since February 2024, the draft ToR for the UN Tax Convention aims to establish a comprehensive and inclusive framework for international tax cooperation.

It seeks to address long-standing issues such as tax evasion, illicit financial flows, and unequal tax burdens that have exacerbated global inequality and hindered sustainable development. 

The draft is viewed as a crucial step toward overturning tax rules that have historically favoured wealthy nations and multinational corporations at the expense of the Global South.

"Although this draft is ambitious and a major step in the right direction, it is weaker than what developing countries were calling for,” Mr Njehu added.

Nevertheless, its success, he said, hinges on the collective will of the international community. 

Adopting the new framework promises to pave the way for a tax system that not only raises the necessary revenues for sustainable development but also holds polluters and tax evaders accountable.

This could enable developing countries to mobilise essential resources for healthcare, education, infrastructure, and climate action.

The draft reflects growing global pressure on governments to ensure that multinational corporations and the ultra-wealthy pay their fair share in taxes. It includes vital commitments to fair taxation, the prevention of tax-related illicit financial flows, and the active participation of developing countries in the decision-making process.

Greenpeace Africa and other organisations have governments worldwide to support this bold step.

The Ad Hoc Committee’s ToR will now be sent to the General Assembly, which will hold a vote during the world body’s 79th session that begins in September 2024.

If adopted, the Assembly would have the convention and two protocols drafted by a Member State-led negotiating committee, which would meet annually for the next three years.

The negotiating committee would then submit a final text to the General Assembly for its consideration in the first quarter of the 82^nd session, according to the ToR.

That would mean that it is only until 2027 that all 193 UN Member States could vote on a finalised UN global tax treaty.

The UN treaty will need a two thirds majority in the General Assembly to be adopted after which it would be opened for signature and ratification to all Member States.