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Convention Concepts: combing through critical issues from week 2 of UN Tax Convention ToR negotiations

Region:
Global



Welcome back to another weekly recap of UN Tax Convention Terms of Reference negotiations. The three weeks of negotiations taking place until August 16 represent an exceptional opportunity to reform our inequitable and ineffectual international tax system. Last week’s recap gave a chronological day-by-day summary of discussions. This edition takes a different approach, honing in on the key debates that defined Week 2.

By: Matt Forgette, CESR fellow.

Issue 1–Human rights back in focus 

Since the genesis of UN tax negotiations, CESR has fought to make human rights a focus in this effort to reshape the international tax system. This is because of the mutually beneficial relationship between tax and human rights. Fair, progressive taxation is essential to the fulfillment of social, economic, and cultural rights. In turn, human rights standards inform state action around taxation by dictating a duty to mobilize maximum available resources, to promote development through international cooperation, and to uphold principles of equality and non-discrimination. 

This week, human rights was once again at the heart of the debate. Countries like Brazil, Colombia and Sri Lanka championing the inclusion of human rights language as a core principle. Meanwhile, nations like India, Nigeria, and Senegal pushed for referencing key human rights documents in the preamble. There was widespread support for retaining the explicit reference to human rights alignment as a principle, and some countries such as Pakistan requested more time to think after opposing the language last week. We see this as evidence that our message on human rights and tax is breaking through, and we welcome this positive development towards a rights-aligned international tax system. 

Unfortunately, some states sought to lessen its impact by moving it to the preamble or through rewording to “taxpayer rights.” (a sneakily nebulous term that, unlike human rights, is not part of an established system of international law). Fortunately, CESR Fellow Charlotte Inge was on the ground at UN offices to offer a compelling intervention on why alignment with human rights standards must remain a guiding principle of international tax reform:

“Only by firmly anchoring human rights in the principles and the preamble of the Terms of Reference can we craft a truly inclusive and effective system of international tax cooperation that upholds the dignity and rights of all people.” 

The debate around human rights within the Convention has not been settled, but CESR will continue to advocate for human rights standards to lead the way in transforming the international tax system.

Issue 2–States struggle with substantive commitments 

Tuesday saw states begin to delve into the section on substantive commitments on the Convention, and the result was rather vexing, with the majority of Global North states scrambling to avoid any sort of commitment whatsoever. The United States, Estonia, Saudi Arabia, and Canada resisted language around “tax progressivity”, revealing their vested interests in maintaining global tax inequity. 

Elsewhere, northern OECD countries made proposals to delete commitments on crucial matters such as: effective taxation of high-net worth individuals, ensuring that tax measures contribute to addressing environmental challenges, and the ​​fair allocation of taxing rights. At one point, the frustrated Negotiating Committee Chair remarked, “I keep hearing calls for flexibility–if we leave everything open, then why do we need a Terms of Reference?”

Fortunately, Global South advocates made brave interventions to preserve an ambitious Convention. The Africa Group vigorously supported the just distribution of taxing rights and the fair taxation of multinational enterprises. They also proposed exchanging "shall" instead of "should," reinforcing the Convention's mandatory nature. Meanwhile, the LATAM delegation fought equally hard for taxation of high net-worth individuals as well as environmental protections. 

Special recognition is owed to Pakistan, which introduced environmental human rights language in the form of “common but differentiated responsibilities.” This principle recognizes that states which produce and have historically produced higher carbon emissions should bear a greater portion of the costs for managing their deleterious effects (and was something that CESR advocated for in our submission on the Terms of Reference). 

Issue 3–Decoding dilution attempts

Prior to the onset of negotiations, CESR warned about “watering down” methods northern OECD countries would likely engage in to lessen the impact of the Terms of Reference. These dilution tactics were on full display this week, as states engaged in coded language as they discussed their approaches to rewriting international tax rules. 

For instance, the United States, Canada, and Norway repeatedly expressed their desire for “more analysis” being needed before making a decision regarding protocol topics. Fortunately, several states adroitly identified this as a delay tactic. Nigeria argued for urgency, aiming to change the protocol negotiating timeline from six months to “as soon as possible.” Colombia was even more direct: “With some of these states, even with 5, 10 years they may not commit to a final outcome. We need clear timetables and deadlines to finalize our work.” 

Another “watering down” attempt arrived in the form of a push for language around “consensus and inclusiveness.” This is essentially just an effort by the Global North to retain veto power in decision-making, blocking attempts for ambitious reform. OECD countries also once again sought to protect their “Inclusive Framework” proposal by introducing language around “avoiding duplication” and “taking into account the work of other forums.” The Africa Group effectively pushed back on this, citing that UN General Assembly Resolution 78/230 (which established the UN tax process): “intended to have a Framework Convention that is independent that is not subordinate to any other platform or region and therefore not complementing any other work.”

What’s next: The Convention has gone dark

As we move into the final week of UN Tax Convention negotiations, the future of the international tax system hangs in the balance. Everything CESR and its allies support is under scrutiny from various governments, but it is also being defended by others. This means the situation is still fluid, and we need to continue fighting for high standards. 

On Thursday afternoon, the UN Tax body transitioned to informal meetings among member states, in which civil society representatives were excluded from discussion. These sessions are announced to be exclusive to Member States, meaning we will be excluded from the room, and the web cameras will be turned off. CESR and our allies have decided to make our voices heard on Twitter (we will never refer to it as X) instead. 

A new draft negotiating text is currently being prepared by the Chair and Bureau, and is expected to be released by Sunday. CESR will continue its coverage of the negotiations, and will keep you up to date on this latest draft.