Who sets the rules for international taxation? For 60 years, the answer has been the Organization for Economic Co-operation and Development (OECD), a club of rich countries. To the rest of the world it seems unfair. Developing countries have long called on the United Nations to take on this task, hoping that its views will have more weight in that forum.
This idea was taken a step further on November 23, when members of the United Nations I decided to start talks on cooperation in the international tax issue. The decision in no way alters a landmark tax deal signed by 137 countries and jurisdictions last year that came to fruition under the leadership of the Organization for Economic Co-operation and Development. And, of course, it exposes the limitations of the so-called “overarching framework” set for implementing that plan.
Although negotiators outside the OECD are now more assertive and have managed some concessions, They make up less than a quarter of those present at ruling party meetings. Only half of African countries participate in the talks. African tax authorities complain they obtained documents at night and are expected to send their comments the next morning.
Ironically, the agreement claims to have solved something developing countries have long demanded: that companies pay more taxes wherever they do business, regardless of their country of residence. through decades, Governments have complained that multinational companies are selling in their country, But pay minimal taxes.
Unfortunately, developing countries are noticing that the prejudices of yesteryear are unavoidable. The deal reallocates the right to tax a small portion of the profits of about a hundred corporate giants. In addition, it sets a minimum corporate tax rate of 15%, Well below the 25-30 percent effective rate It is common in Africa, Asia and Latin America.
Signatory countries are also expected to waive their taxes on digital services. Nigeria’s finance minister, who collects taxes, said the overall package could get worse for her country. Africa’s largest economy is one of four participants in the talks, however They refused to sign the agreement. Martin Hirson of the International Tax Center and Development Research Group says other countries may delay implementing the plan.
Initial OECD calculations, before the plan was finalized, expected an increase in corporate tax revenues of about three to four percent in poor countries, a proportion similar to that of rich countries, but only about 0.1 percent of GDP. Grace Perez Navarro, director of fiscal policy at the Organization for Economic Co-operation and Development, acknowledges this Some governments liked to get more or give up lessbut the truth is that “everyone should sit at the negotiating table ready to make concessions” and developing countries “on an equal footing”.
Many of them are not convinced. “The problems with the deal are a sign that after 10 years of trying at the Organization for Economic Co-operation and Development, it is time for the UN to court,” said Irene Ofungi Odida, a Ugandan lawyer who has served on committees appointed to investigate the financial flows. The tense history of the climate talks, held under the auspices of the United Nations, suggests that they can give developing countries a voice, but they will not be able to eliminate imbalances in the balance of power.
Fight for tax talks at the United Nations It will not pass quickly. Once approved, delegates representing the United States and the European Union warned that it would “undermine” the progress made by the Organization for Economic Co-operation and Development. But from a developing country’s perspective, it was a landmark moment: a barometer in the battle to decide who should pay taxes and who could collect them.
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