By Edson Baraukwa | Africa Guardian
African nations have achieved a significant milestone by securing a platform at the United Nations (UN) to engage in global tax discussions on equal terms. This development marks a critical step in addressing issues such as tax evasion, illicit financial flows, and harmful tax competition, all of which have hindered these countries from generating the necessary revenue for their development needs.
On August 16, UN Member States adopted the Ad Hoc Committee’s Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation. This decision paves the way for governments to fund essential initiatives to combat extreme poverty, the COVID-19 pandemic, and the climate crisis by reclaiming billions of dollars lost to tax abuse, corruption, and money laundering.
“For many years, Africans have voiced concerns that the current tax system is skewed in favor of wealthy, developed nations, making it difficult for developing countries to maximize revenue from their resources,” stated Chenai Mukumba, Executive Director of the Tax Justice Network Africa (TJNA).
Addressing the Global Financial Gap
The newly proposed UN Tax Convention aims to address a critical gap in the global financial system: the lack of effective institutions for international tax cooperation. This gap has often allowed multinational corporations to evade taxes in poorer jurisdictions, while being shielded by wealthier regions.
“This situation has led to substantial revenue losses for African countries due to illicit financial flows,” added Mukumba, who participated in the historic vote in New York. “The adoption of the terms of reference for this tax convention is a crucial step toward creating an agreement that will address the imbalances in the global tax system.”
The convention is set to tackle a broad range of tax policy issues, many of which have the potential to generate significant revenue for financing sustainable development and climate protection. According to a briefing paper by Global Policy Forum Europe and its partners, a reform of the corporate tax system could yield $500 billion annually, while a wealth tax on high-net-worth individuals could generate an additional $200 billion each year.
Furthermore, the globally coordinated implementation of progressive environmental taxes could not only raise additional revenue but also positively influence sustainable development efforts worldwide.
The UN Tax Convention holds considerable promise for bridging the financing gaps in sustainable development, both in the Global North and South. With additional tax revenues, governments would be better equipped to provide public services and fulfill their human rights obligations.
A more effective system of international tax cooperation, such as the one envisioned by the new convention, could create a win-win situation for all parties involved.
Speaking on behalf of the Africa Group during the negotiations, Nigeria hailed the vote as a victory for all countries advocating for a fair and inclusive international tax system. “The UN Tax Convention process represents the first opportunity for all UN Member States to collaborate on equal footing to establish global tax rules,” Nigeria emphasized.
Nigeria also pointed out that while most international tax cooperation rules have been shaped by regional groups, the UN Tax Convention will be a truly global entity, designed to address international tax cooperation comprehensively without duplicating the work of existing platforms.
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