African countries have successfully secured a platform at the United Nations to discuss global tax regulations on an equal footing, a development that is expected to empower them to tackle critical issues such as tax evasion, illicit financial flows, and harmful tax competition.
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.
The newly introduced UN Tax Convention aims to address shortcomings in the global financial structure which have often enabled multinational corporations to evade taxes in poorer jurisdictions.
"For many years, Africans have been saying that the current tax system is unfair in the sense that it is biased towards rich countries or developed countries and because of that it doesn’t allow developing countries to generate as much revenue as they should from their own resources,” said Chenai Mukumba, Executive Director of the Tax Justice Network Africa (TJNA).
Chenai, who took part in the historic vote in New York, explained that this situation also fosters an environment where African countries lose substantial revenue to illicit financial flows. She noted that the adoption of the terms of reference for the convention is intended to establish an agreement that will ideally rectify these imbalances within the global tax system.
The convention is intended to address a wide range of tax policy issues, many of which have a huge potential for revenue for financing sustainable development and climate protection.
A briefing paper published by Global Policy Forum Europe and partners said that a reform of the corporate tax system could generate $500 billion annually, and a wealth tax on high net worth individuals could turn in an extra $200 billion annually.
The globally coordinated introduction of progressive environmental taxes could not only generate additional revenue, but also would have strong positive steering effects on promoting sustainable development worldwide.
The UN Tax Convention thus has considerable potential to close the gaps that exist in terms of financing sustainable development, which are both in the north and south.
Governments, through additional tax revenues, would also be able to offer more public services to implement their human rights obligations.