As the final round of negotiations on the United Nations Framework Convention on International Tax Cooperation terms of reference approaches, the stakes are high. We analyzed the 103 submissions following the release of the Zero Draft, analyzing the key issues at play and where different countries stand.
By Charlotte Inge & Matthew Forgette, CESR Fellows
Where are we?
On June 7, 2024, the Bureau of the Ad Hoc Committee published a proposal for a “Zero Draft” Terms of Reference (ToRs) for the United Nations Framework Convention on International Tax Cooperation (UNTC). This release represented another milestone in this historic ongoing UN process, with this initial document serving as a foundational blueprint designed to guide the much-needed reform of international tax rules.
In response to the Zero Draft, CESR assembled a submission that stressed the importance of explicitly embedding human rights within the Framework Convention. The submission praised the Zero Draft's recognition of progressive taxation and nations' varying capacities, but called for stronger commitments to climate justice, gender equality, and human rights in tax policies. Importantly, it emphasized the need for more robust human rights-based framing throughout the Convention, rather than limiting it to a single mention that only protects certain taxpayers.
Many stakeholders are engaging in these pivotal discussions, seeking to shape substantive provisions in the ToRs. In total, the Ad-Hoc Committee received 103 submissions, composed of 58 member-states, 2 UN organizations, 6 international organizations, 7 business and trade associations, and 30 civil society/academic organizations. The 58 member-state responses represented an increase from the initial 49 member-state responses in the initial call for input, indicating a sustained and heightening engagement in the tax negotiations under the auspices of the UN.
After analyzing the 103 submissions, we identified the most salient trends and topics including calls for stronger integration of human rights principles in international taxation; concerns over the draft's narrow framing of human rights solely in relation to privacy, potentially limiting tax transparency; stressing the links between climate and tax justice; the notable absence of gender considerations in member state submissions; and tensions between Global North and South countries over decision-making, timelines, and the relationship with existing OECD tax reform efforts.
Critical issues in the submissions
1. Human rights in the spotlight
The responses to the Zero Draft reveal several encouraging trends that align with CESR's long-standing demands in the realm of human rights and fiscal policy. We observed two distinct categories of human rights engagement in the submissions:
- Explicit human rights language: 12 submissions made specific calls for the ToRs to include stronger human rights language. This included submissions from 1 member state, 1 UN entity and 10 civil society organizations.
- Substantive rights-based approaches: A larger number of submissions incorporated principles and approaches that, while not explicitly labeled as human rights, align closely with a rights-based framework, including:
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26 out of the 58 member country submissions and
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32 out of the 45 submissions from other organizations.
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These substantive rights-based approaches included an emphasis on inclusive & equal participation, non-discrimination, sustainable development, special consideration for developing countries, fair allocation of taxing rights, capacity building, tax progressivity, and emphasis on domestic resource mobilization.
These figures show that rights-aligned principles are increasingly influencing the discourse on international tax cooperation.
While non-member state submissions led the charge in advocating for specific inclusion of human rights language, Chile’s submission stands out as a groundbreaking stance from a member state in championing a robust human rights framework. Chile's proposal seeks to fortify human rights within the convention by integrating foundational human rights principles from the UN Charter into its preamble and objectives. It further advocates for expanding the focus on human rights in the convention's principles. Also, it emphasizes the principle of "progressivity" in taxation, asserting higher earners should contribute proportionally more to redress wealth disparities.
This growing consensus around the importance of explicit human rights language and substantive rights-based approaches in international tax, coupled with Chile’s landmark submission, marks a significant milestone in advocacy efforts from CESR and other allies. Chile is paving the way for a paradigm shift in how nations view the intersection of human rights and international tax. This effort shows the potential of successful regional advocacy, particularly through the Platform for Collaboration on Tax in Latin America and the Caribbean (PTLAC), of which Chile holds the pro tempore presidency, and with which CESR engages routinely through its Civil Society Council. This stance demonstrates that member states can and should push for a tax system that actively promotes human rights & reduces inequalities, setting a powerful precedent for a more comprehensive, rights-based approach to global tax governance.
2. The transparency versus privacy debate
While the ToRs make important references to elements intrinsically linked to the realization of human rights - such as broader commitments to sustainable development and social policy - its sole explicit mention of human rights relates to privacy protection. This narrow framing has sparked concern in submissions from various stakeholders about the potential for conflict between transparency and privacy – two core principles of the human rights’ framework. Notably:
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Kenya warns this could undermine effective international tax cooperation through being used to circumvent transparency requirements.
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Zambia highlights how privacy claims have historically hindered transparency and information exchange on tax matters.
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Lesotho and Senegal likewise view this limited inclusion of human rights as risky, potentially enabling abuse by taxpayers or member states.
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Nigeria also proposes the complete deletion of the phrase.
Importantly, these submissions broadly advocate for more substantive rights and development-focused approaches (i.e., a more comprehensive rights-based approach that doesn’t inadvertently obstruct tax transparency), echoing CESR’s position as well as the ones of several other stakeholders).
3. Climate action and taxation as an emerging priority
The current ToRs acknowledge the importance of environmental and climate issues, mentioning them as potential commitments and future protocol topics. This is a significant step forward in current tax cooperation debates, given that the nexus of climate and tax was recognized as a key priority by numerous stakeholders. However, CESR’s submission advocates for a more comprehensive approach that aims to ensure that environmental tax measures not only address climate challenges but also uphold principles of climate justice and human rights.
Prioritizing environmental and climate challenges emerged as a priority topic for early protocols among submissions from various OECD and non-OECD member States. Dozens of submissions mentioned the intersection of climate and tax, establishing the linkage as a key issue within the Convention. Small island states particularly vulnerable to climate change used their submissions to underscore the importance of addressing their specific climate-related concerns within the Convention. For example, the Bahamas submission called for upgrading "tax measures on environmental and climate challenges" to an early protocol, while also “recognizing the potential of environmental & climate taxes to incentivize emissions reduction, promote clean energy, and address vulnerabilities of small island states.” Meanwhile, several African countries emphasized that the Convention should pay special attention to natural resource exploitation & taxation of extractive industries. Colombia’s submission critically integrates environmental & climate considerations through calling to prioritize environmental consideration and advocating for “green” taxes.
Further, various submissions from civil society, international organizations and UN bodies, including CESR, advocated for more ambitious, rights-based approaches, often linking environmental tax to broader sustainable development and human rights principles.
3. Gender Equality: a glaring omission from Member State submissions
Issues relating to the impact of tax policies on gender equality were conspicuously absent from Member State submissions, as well as absent in the zero draft. In contrast, 9 civil society organizations and 1 UN entity stepped up to fill this gap, including emphasizing the importance of:
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Gender-transformative tax policies and the redistribution of care & domestic work
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Addressing the disproportionate tax burden on women through regressive and consumption taxes
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Full and effective participation of women at all levels in tax policy-making and decision-making.
This disparity underscores the crucial role civil society plays in ensuring that gender considerations are not overlooked in international tax cooperation efforts and highlights the need for Member States to integrate gender perspectives more robustly in future discussions.
Dangers of “watering-down” the Convention: tensions between Global North and Global South countries
The Zero Draft references issues such as redressing global inequality through progressive tax, highlighting the nexus of climate and tax, and promoting international cooperation towards sustainable development are critical. Nevertheless, it is also crucial to mark the concern of many Global South countries and civil society organizations regarding the potential “watering down” of the Convention process. Through this “watering down”, some Global North member states aim to dilute the potential efficacy of the terms of reference and the Convention as a whole through efforts to weaken its provisions and reduce its scope. Careful analysis of Global North member-state submissions reveals this “watering down” process can take many forms.
1. Emphasizing procedure over substance
One such method of “watering down” is through advocacy for a more procedural approach to the terms of reference, leaving substantive negotiations for an (often ambiguous) later time and place. For example, the very first paragraph of the United States’ submission argues precisely for a “need to focus on procedural elements”, and posits that “the zero draft includes several instances that appear to overstep the bounds of the mandate of the Committee.” The joint submission from Canada, Australia, and New Zealand echoes this concern, clearly stating, “the terms of reference should address procedural issues.” These efforts can potentially undermine some of the most impactful components of the zero draft, such as the commitments to specific protocols. Reducing the terms of reference to mere procedural guidelines leaves more room for later derailment, and CESR stands in full opposition to this procedural approach.
2. Consensus-based decision-making as de facto veto power
The member-state submissions also reflected a tension over the decision-making process of the Convention, specifically centered around whether decisions would be made by consensus or by majority. Essentially, requiring decisions to be made by full consensus could impede progress, giving member states veto powers. Consensus would allow individual member-states -especially those from the Global North- to halt negotiations around substantive commitments they dislike. Many of the African submissions articulated this dilemma, as illustrated in the Africa Group submission underscoring that decision-making rules should be “built on the recognition that the majority of countries need to be able to address issues, if differences prevail.” Critically, it should be recognized that unanimous consensus on any individual issue is almost never possible, particularly when dealing with a topic as complex and multi-faceted as the international tax system. Allowing individual member-states de facto veto power to reject proposals unfavorable to their economies is a recipe for inaction. The Secretary General already noted that current tax cooperation efforts led by the OECD, while aiming at participation on “an equal footing” and decision-making “by consensus”, create difficulties in practice “for countries with small international tax staff to influence decision-making…”, specially when countries are considered to agree unless they raise an objection, instead of affirmatively voting in favor of it. We expect discussions on the type of majority needed for decision-making. OECD countries are likely to oppose a simple majority (more than 50%) and argue for the need for a super majority (⅔ or more) that would give them more power to shape the content and effectiveness of the Framework Convention.
3. Non-binding terms of reference allow for wiggle room
The binding nature of the terms of reference was also hotly contested in several member-state submissions, with several Global North proposals clearly opposing making any of the protocols or issues discussed in the Zero Draft binding. The United States submission was perhaps most explicit, asserting, “Paragraph 14 lists early protocol topics that should be developed. The ToR should be clear that these topics are non-binding examples to preserve a negotiating committee’s flexibility.” One watering-down strategy utilized throughout the Global North submissions was undertaken through the re-wording of certain language, such as using the verb “could” rather than “should” to weaken substantive commitments to mere recommendations. For instance, Norway’s submission explicitly backs this approach, suggesting “rewording the introduction in para 9 to serve as a recommendation by replacing ‘should’ with ‘could’.” These rhetorical strategies give states wiggle room to alter or outright reject their obligations under the terms of reference and should be resisted.
4. Debates surrounding the Convention timeline
Additionally, the open question regarding the timeline of the Convention process offered another avenue for debate. The Zero Draft offers an ambitious timeline, reflective of the urgent need to reform our international tax system. However, many member-states, including some in the Global South, felt that the timeline was too tight and could potentially restrict the number of issues that could be addressed in the Convention. In particular, the African bloc seemed to express a belief that the timeline was reasonable and achievable, while a few of the Latin American countries (Colombia and Belize, specifically) felt the timeline was overly ambitious. Those Latin American submissions highlighted the difficulty in enacting and implementing protocols in such a short time frame. While this is a legitimate concern, CESR wishes to stress its continued support for a swift process that aligns with the gravity of the problems currently inherent to the international tax architecture.
5. Unhelpful push by Global North for “complementarity” with OECD tax reform
Finally, many Global North submissions expressed concerns regarding the danger of “duplication” of tax reform work in other relevant forums, particularly the ongoing efforts undertaken under the Organization for Economic Cooperation and Development (OECD). These submissions argued for a “complementary” approach with the OECD process, such as the French submission, which urged for the “consideration of potential synergies and the leveraging of existing tools, strengths, expertise and complementarities of the multiple institutions and processes involved in tax cooperation.” As many Global South submissions rightly pointed out, this support for “complementarity” is quite pernicious and undermines the UN process. As CESR has previously highlighted, the OECD process has crowded out the participation of Global South countries and has also been found discriminatory based on race and gender. Much of the motivation for moving the global tax debate to the UN was due to the inadequacy of the OECD Inclusive Framework process. Thus, CESR stands in solidarity with the Africa Group submission, “stressing (its) strong opposition to the inclusion of any element relating to ‘complementarity’ in the (ToR) objectives.”
Next steps
As we approach the second round of negotiations for the Framework Convention, it is critical to remember that we have an opportunity to fundamentally reshape the global tax architecture to be more just, equitable, and responsive to global challenges. Key goals for the upcoming negotiations should include:
- Strengthening human rights language throughout the convention, moving beyond the narrow focus on privacy rights.
- Ensuring robust rights-based integration of environmental and climate considerations within the ToR.
- Addressing the notable absence of gender considerations in member state submissions.
- Resisting attempts to dilute the Convention’s effectiveness through a procedural focus or weakened language.
- Balancing an ambitious timeline with the need for thorough, inclusive negotiations.
As we stand at this pivotal moment in the development of a new global tax framework, the importance of continued engagement and advocacy cannot be overstated. The collaborative spirit exhibited in negotiations thus far must be maintained and strengthened as we move towards this “once-in-a-lifetime opportunity to fix discriminatory and regressive international tax rules”.
For more information on international tax, human rights, and the United Nations Tax Convention process, see here.