The UN makes history

In New York today, 125 UN Member States backed the creation of a UN framework convention on taxation. The countries of the Global South voted almost unanimously in favour. Surprisingly, some OECD members abstained. These were Norway, Iceland, Turkey, Mexico, Costa Rica and candidate country Peru. Colombia and Chile actually supported the resolution. Switzerland, along with all other OECD countries, including the US, the UK and the EU, rejected it en bloc. The decision is historic: such a convention had already been mooted in 2015 at the Third Conference on Financing for Development in the Ethiopian capital Addis Ababa, but was ultimately not included in the Addis Ababa Action Agenda (AAAA) adopted at that time. For the first time in the century-long history of multilateral tax policy, the UN is witnessing the creation of a truly global forum with legally binding decision-making, where all countries can negotiate and vote as equals on the future rules of international tax policy. The principles and elements of the convention will be defined over the coming year: for example, tax transparency and the taxation of multinationals or offshore assets.

There are a number of reasons why what was utopian for the global tax justice movement ten years ago has now become possible. The first and most important is the failure of the OECD – the Organisation for Economic Co-operation and Development. Over the past 15 years, it has failed to introduce tax reforms that would have raised substantially more tax revenue for the countries of the Global South. To be sure, the OECD has recently tried to shed its image as an exclusive club for the richest countries (there are only 38 members). It has also sought to dispel the widespread impression that it is only concerned with securing (tax) privileges for its members. As a result, non-members have been able to take part in negotiations since 2016. However, the introduction of a minimum tax for global companies is of little benefit to the countries of the South that make up the G77 at the United Nations (a group that now has 134 members). Countries such as the US, Ireland and Switzerland, for example, have turned their recent corporate tax reform into a rewards programme for low-tax countries.

This is why the G77 countries have now turned to the UN. The OECD, for its part, may now see its relevance in international tax policy issues substantially diminished: leading countries such as the US, Canada, China and other Asian countries have in recent months raised doubts about their national implementation of the latest OECD reform. In Switzerland, the Swiss business federation Economiesuisse and other representatives of the business community have recently spoken out in parliament along these lines, calling for the introduction of the minimum tax in Switzerland to be postponed. All this is grist to the UN tax mill. If the countries of the North block progress there, the result could be a global corporate tax system in the form of a one-sided patchwork that serves neither the interests of companies nor those of countries. This is exactly what the OECD was trying to prevent during its last reform period, but it is failing precisely when it comes to implementation by individual countries and their willingness to push ahead with OECD reforms. The first pillar of the reform, the reallocation of some taxing rights over companies from home jurisdictions to market jurisdictions, is falling by the wayside in Paris.

The USA, EU and Switzerland must shift positions

In recent days, prominent economists and former politicians such as Joseph Stiglitz, Jayati Gosh, Thomas Piketty or Thabo Mbeki, have come out in favour of a UN tax convention. The Global Alliance for Tax Justice, of which Alliance Sud is a member, has been campaigning for this for decades. We urge Switzerland to play a constructive role in the forthcoming negotiations on the implementation of the convention. So far it has been most notable for its disregard for the project. In the context of its current Security Council mandate, Switzerland – still seen abroad (and rightly so) as an old-fashioned tax haven – now has a unique opportunity to act as a bridge-builder at the UN and as a stabilising force between the blocs in the field of economic policy. Such a stance would be consistent with its campaign slogan for the Security Council: "A Plus for Peace". Finally, a global tax policy that raises revenue for all countries is also a security policy, because sufficient tax revenue is the basis for a strong community with good education, public infrastructure and an efficient social and health sector. These are key components of poverty reduction, as for the promotion of democracy, migration management, and the prevention of terrorism. Last but not least, greater global tax fairness is essential in order to finance holistic and sustainable development around the world, which the international community hopes to achieve by 2030 through the UN's Sustainable Development Goals. The past 10 years have shown that in this regard, the OECD is incapable of delivering. Like all other "blockers" from the North, Switzerland too should change its position and contribute constructively to the drafting of the convention.

Greater economic policy cooperation in a divided world

The current developments in tax policy at the UN also have a geopolitical component: the first UN resolution on strengthening tax policy was unanimously adopted by the General Assembly a year ago. Given the geopolitical situation at the time, the Northern countries did not dare to further alienate the G77 countries after their anger over the global response to the pandemic (vaccination inequality), the largely unmitigated consequences of the war in Ukraine for the Global South (food crisis) and the climate and debt policies of the North (little understanding of the situation in the South). They were anxious not to drive the South further into the arms of Russia and China. Abandoning the willingness shown a year ago to engage in fiscal and hence economic cooperation would be highly risky for the West. A constructive approach, on the other hand, would create an opportunity to restore universalist perspectives, at least in tax matters, in a world where very strong centrifugal forces are currently at work.