African Nations, Including Nigeria and Ghana, Spearhead UN Vote for Enhanced Role in Tax Governance

Nigeria, Ghana, South Africa, and several other nations within the United Nations have chosen to assert a more prominent role in international tax matters, challenging the traditional dominance of the Organization for Economic Cooperation and Development (OECD). The OECD, based in Paris, has historically spearheaded global tax negotiations, but developing nations, growing increasingly frustrated, are advocating for greater involvement from the United Nations.

The year 2021 witnessed an unprecedented agreement among over 130 countries, a landmark deal aimed at mitigating corporate tax avoidance by multinational corporations. However, developing nations express discontent, contending that they stand to gain disproportionately less revenue from these reforms compared to their wealthier counterparts.

A recent vote at the UN marked a pivotal moment in this paradigm shift. The resolution, adopted on Wednesday, initiates the process of establishing a more substantial role for the UN in international tax cooperation. This move, driven primarily by African nations, garnered support from 125 countries, predominantly low and middle-income nations.

Notable backers include Nigeria, Ghana, China, India, Brazil, and South Africa. Conversely, 48 nations, mainly developed countries such as EU member states, the United States, the United Kingdom, Japan, and Korea, voted against the measure. There were also nine abstentions, including OECD member states Norway, Iceland, Mexico, and Turkey. Notably, Chile and Colombia, both OECD members, aligned themselves with the resolution.

The African Union celebrated the development, highlighting the long-standing struggle of Global South countries to establish an inclusive process at the UN for participating in agenda and norm-setting on international tax matters. The Union anticipates the creation of an effective UN Framework Convention on International Tax Cooperation to swiftly mobilize resources for their development.

In response to this shift, an EU official expressed support for multilateralism and effective international cooperation in tax matters. However, the official cast doubt on the proposed convention’s efficacy, suggesting that it might lead to the duplication of existing international standards. Concerns were raised that a new UN tax convention could potentially reopen negotiations on issues for which promising outcomes already exist, jeopardizing the progress made in ensuring tax transparency and fairness over the years.

The OECD, despite the challenge to its dominance, remains steadfast in its commitment to achieving consensus-based solutions. Mathias Cormann, the head of the OECD, asserted the organization’s pride in its record of addressing tax evasion and avoidance, stabilizing the international tax system, and supporting developing countries. Cormann reiterated the OECD’s dedication to collaborating with global partners, including the UN, to enhance inclusivity and promote a more equitable international tax system.

Norway, in a diplomatic gesture, chose to abstain from voting against the resolution, emphasizing a desire to signal cooperation and bridge-building with developing countries. Norway’s foreign minister, Espen Barth Eide, expressed concerns about the growing polarization between the West and the rest of the world. He applauded the Africa Group for elevating the issue to a global platform and stressed the importance of fostering connections through a more global agenda.

This development follows a previous resolution brought forward by 54 African countries at the UN General Assembly, aiming to strengthen the inclusiveness and effectiveness of international tax cooperation. The resolution prompted the UN secretary-general to produce a report outlining three options for enhancing the UN’s role in global tax matters, including two legally binding options, such as the framework convention, and one voluntary alternative.