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Writer's pictureInternational Lawyers Project

Reimagining Global Tax Governance Through the UN Tax Convention

By Mary Ongore and Carter Cheng 

 

Photo: United Nations, Geneva. Credit: Mary Ongore (ILP)

Executive Summary  

 

The UN Tax Convention represents an opportunity to address the long-standing inequities in international tax governance. For decades, the OECD-led framework has been criticised for its exclusivity, inefficiency, and non-binding nature, which disproportionately disadvantages Global South countries. High participation costs and geopolitical barriers have prevented Global South countries from participating meaningfully in the OECD-led frameworks such as the Inclusive Framework and the Global Forum. This has allowed harmful tax practices - such as tax avoidance and illicit financial flows - to persist, depriving them of vital resources for development. 

 

Emerging from decades of advocacy, the UN Tax Convention seeks to democratise global tax rules by giving all nations an equal voice. It aims to correct historical imbalances which excluded developing countries from the global tax decision-making process, and aims to empower Global South countries, whilst enhancing global cooperation. With a structured timeline and inclusive approach, the convention sets the stage for binding global rules that prioritise fairness and accountability. The UN Tax Convention is, therefore, more than a policy proposal; it is an historic opportunity to create a fairer, more inclusive global tax system. 

 

What’s wrong with the existing global tax governance structure? 

 

The need for a UN Tax Convention lies in the long-standing issues in the global tax governance framework, which has historically been dominated by the Organisation for Economic Cooperation and Development (OECD). For decades, international tax standards have been developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) and the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum). The UN Tax Committee has had a limited role thus far.  

 

Developing countries have long expressed dissatisfaction with the OECD-led processes for various reasons, including: 

 

Lack of representation 

The main grievance of the developing countries is their lack of representation in the OECD-led tax governance structure. At present the OECD comprises 38 mostly high-income countries. The IF, created in 2015, is part of the OECD-led programme against Base-Erosion and Profit Shifting (BEPS) aimed at involving non-OECD members in combating tax avoidance by Multinational Entities (MNEs) and improving the coherence of international tax rules to ensure a more transparent tax environment. However, only 27 African countries are members of the IF out of a total 147 members. The Global Forum, created in 2000, includes only 39 African countries out of 171 members. Thus, both bodies lack universal membership.  

 

Flawed agenda-setting 

Although the IF was created to improve developing country participation, its agenda was set by the rich OECD/G20 countries prior to their involvement and therefore without input from those new members. Thus, critical issues affecting developing countries such as illicit financial flows (IFFs), are not central to the agenda of the IF. On the other hand, the Global Forum’s mandate is restricted to the exchange of information for tax purposes. As such, it does not address non-tax related IFFs. 

 

Lack of transparency 

The decision-making process at the OECD is shrouded in secrecy with decisions being made behind closed doors. For instance, although developing countries are members of the IF Steering Group (the most powerful governing body), there is a lack of certainty about how the inputs of the Working Parties are incorporated in decisions. Moreover, developing countries are often underrepresented in the Working Parties, leading to unequal decision-making powers between all the members of these bodies.  

 

Limited Involvement of the UN 

The UN’s limited role in shaping tax rules has also prevented the prevailing global tax governance structure from being a truly inclusive global tax framework. Although the UN Tax Committee has made strides in areas such as double tax agreements, its recommendations lack the binding authority to ensure compliance.  

 

Given these long-standing structural weaknesses of the existing global tax governance structure, the UN Tax Convention was developed to address these issues by offering a more inclusive and transparent system for global tax governance.  

 

The Origins: The Push for a UN Tax Convention   

 

For over twenty years, there have been proposals for the reform of the global tax governance system which were each met with resistance and compromise. These included: 

 

  • The UN-level Panel on Financing for Development publishing the Zedillo Report calling for the establishment of an International Tax Organisation in 2001. The UN Tax Committee (UNTC) was formed as a compromise; 

  • The G77 proposing the elevation of the UNTC to an intergovernmental body with a broader mandate to make recommendations on issues relating to tax matters in 2010; 

  • Calls for upgrading of the UNTC at the Third International Conference on Financing for Development in 2015; 

  • In 2019, the Africa Group (one of the UN regional groups) proposing a UN tax convention at the UN High Level meeting on International Cooperation to Combat Illicit Financial Flows and Strengthen Good Practices on Assets Return; 

  • In 2021, the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (the UN FACTI Panel) reiterating in its final report the need for developing an intergovernmental body on tax matters under the auspices of the UN.  

 

Concrete developments however meaningfully began in May 2022 when the Economic Commission for Africa Conference of African Ministers of Finance, Planning, and Economic Development called for negotiations towards an international convention on tax matters under the auspices of the UN at their 54th session in Dakar. In November 2022, the African Group, led by Nigeria, tabled a resolution on the “Promotion of inclusive and effective international tax cooperation at the United Nations." This was adopted by the UN General Assembly (UNGA) by consensus and the UN Secretary-General was mandated to compile an exhaustive report on the issue based on consultations with stakeholders, and to provide options for improving the effectiveness of international tax cooperation.  

 

Following this directive, the UN Secretary-General engaged in consultations and presented the following proposals in September 2023: 

 

1. UN Multilateral convention on tax: a binding multilateral convention that enhances obligations with regard to international tax cooperation and modifies taxing rights; 

2. UN Framework convention on international tax cooperation: a binding legal framework that provides for the governance framework of international tax cooperation with subsequent protocols that are more regulatory; 

3. UN Framework for international tax cooperation: a non-binding agenda for improving international and national tax norms.  


In favour of the second option, the African Group presented resolution 78/230 on UN tax cooperation which was adopted by the UNGA on 22 December 2023. The resolution mandated the creation of an ad-hoc intergovernmental committee to negotiate the Terms of Reference for a UN Framework Convention on international tax cooperation with the participation of international organisations and civil society. The committee’s report was to be presented to the UNGA at its 79th session the following year.  


In February 2024, the ad-hoc Intergovernmental Committee held an Organisational Session. This session set out the committee’s structure, the members’ roles and how decision-making would take place. Decision by majority was favoured over decision making by consensus. 


Following the Organisational Session, there were two substantive sessions during which negotiations on the Terms of Reference took place. They finalised the draft Terms of Reference for the UN Tax Convention which were submitted to the UNGA for consideration at its 79th session in September 2024.  The Terms of Reference establish a foundational blueprint for the Framework Convention, encompassing core objectives, guiding principles, and commitments to achieving tax cooperation goals. They also outline the development of targeted protocols addressing specific tax issues and propose a structured approach and timeline for negotiation, aiming for completion by 2027. 


On 27 November 2024, the UNGA adopted the Nigeria-led Africa Group  resolution  to adopt the Terms of Reference  for the new UN Framework Convention. The Terms of Reference mandated the negotiation of the framework convention and two protocols. This marks a huge milestone in the fight for tax justice and a reimagining of international tax cooperation.  

 

Key takeaways 

 

Some of the key takeaways of the resolution are the reference to States’ obligations to human rights law as a principle that governs the Convention’s objectives.  This acknowledgment that taxes raised should be used for the fulfilment of human rights allows for discussion on the impact that tax and fiscal measures have on these rights as well as extraterritorial obligations.  Regressive provisions such as the taxpayers’ right to privacy, which could be abused by MNEs, did not make it to the final draft although the current text creates opportunities for these negative aspects to be included. 


The Convention also allows for the development of a Protocol on tax cooperation on environmental challenges. This is welcome as it brings the tax related aspects of addressing climate change within the scope of the UN. 


Reference to IFFs has been made in the main body of the text which is a win for developing countries that are disproportionately affected by them. 


Dispute resolution between taxpayers and revenue authorities has been mentioned, both in the commitments and the protocol. There are concerns that this may introduce closed, binding arbitration. Furthermore, it opens up the discussion of whether the current system of bilateral treaties will continue to apply or whether the UN will take over dispute resolution.   

 

Finally, on a positive note, the Terms of Reference recognise the need for participation of international organisations, civil society and other relevant stakeholders. This is welcome as negotiations will be inclusive.   

 

Why is the UN Tax Convention a Game-Changer?  

 

The UN Tax Convention represents a change in the international tax architecture and creates a chance to upend the historical imbalance by giving all nations an equal voice in shaping global tax rules. This is not just about representation; it’s about rewriting the rules of the global economy. 

 

Combatting Tax Evasion and Illicit Financial Flows 

The ability of corporations and wealthy individuals to avoid taxes through complex financial arrangements undermines public finances everywhere. In Global South countries, where public revenues are limited, the impact is particularly devastating. Tax evasion and illicit financial flows strip governments of the resources they need to finance infrastructure, education and healthcare. The UN Tax Convention is not merely about technical tax rules; it is also a battle to reclaim control over tax evasion and illicit financial flows.  

 

Binding Rules: Moving Beyond Empty Promises 

A key flaw in the current OECD-led system is its reliance on non-binding agreements, which countries can ignore without consequence. The UN Tax Convention seeks to change this by establishing enforceable global tax rules. Its structured timeline, with input from a wide range of stakeholders addresses long-standing governance failures. 

 

The Broader Economic Stakes 

Taxation is more than just a tool for funding governments - it is a mechanism for shaping societies. It can reduce inequality, foster sustainable investments, and stabilise economies. Yet no country can tackle tax evasion and avoidance alone. The challenges of globalisation and digitalisation demand a coordinated global response. The UN Tax Convention could provide the institutional backbone for such efforts, ensuring that every nation has the means to pursue its developmental goals. 

 

What next? 

 

Following the historical vote, the negotiations on the text of the framework convention and two early protocols begin in February 2025 and will continue until 2027. There is a lot of work yet to be done and the involvement of civil society is critical.  

 

The negotiations have shown that there is a new era with Africa moving from rule-taker to rule-maker. This is critical to allow for rule-making to be truly inclusive and representative of all countries. Global South countries are now participating in developing the agenda and setting a precedent for how global institutions can evolve and serve the many and not the few.  

 

 


Mary Ongore is Legal Manager of our Sustainable Finance Programme. Mary is a Kenyan legal professional with extensive experience in taxation including research on international tax, fiscal policy, illicit financial flows and human rights aspects of tax policy.   

 

Carter Cheng is a Legal Fellow at ILP and a Master of Public Policy student at the University of Cambridge. Carter has developed broad experiences in climate action at various UN agencies, including ESCAP, SDSN, and the UNCCD Youth Caucus.  

 

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