Global Leaders Call for Tax Reform Action
During a pivotal special meeting of the Economic and Social Council, global leaders emphasized the urgent need for enhanced international cooperation in tax matters to drive sustainable development. As the United Nations framework convention on taxation enters the negotiation phase, discussions focused on inclusive tax cooperation and addressing gender disparities in tax policy. The meeting highlighted the ongoing challenges of tax evasion and avoidance, particularly in developing countries, and the necessity for robust domestic tax systems.
Strengthening Global Tax Cooperation
At the forefront of the discussions, Robert Rae, President of the Economic and Social Council, underscored the significance of two decades of dialogue between the Council and the UN Tax Committee. This collaboration, he noted, serves as a model for integrating specialized policy areas into the broader development agenda. Rae stated, “Fair tax systems and effective fiscal policies are powerful tools to mobilize resources and reduce inequalities.”
Li Junhua, Under-Secretary-General for Economic and Social Affairs, echoed these sentiments, pointing out that developing nations continue to suffer substantial losses due to tax avoidance and evasion. He stressed the importance of enhancing domestic tax administration and fostering international cooperation to combat these issues. Furthermore, he highlighted the need to address systemic gender biases within tax policies to promote inclusivity.
Liselott Kana, Co-Chairperson of the UN Tax Committee, elaborated on the committee’s efforts to update the UN Model Tax Convention and the Manual for the Negotiation of Bilateral Tax Treaties. These updates have significantly raised the profile of the UN Model, influencing bilateral tax treaty negotiations. Kana emphasized that the committee’s work now extends beyond traditional tax issues to encompass domestic resource mobilization, reflecting the real-world challenges faced by tax policymakers.
Digitalization: A Double-Edged Sword
Maria José Garde, Director-General of Taxation at Spain’s Ministry of Finance, shared insights on the impact of digitalization on tax administration. She noted that while digital tools enhance efficiency and compliance, they also create opportunities for tax evasion. Garde argued that taxation is not merely about revenue collection; it is a powerful instrument for addressing inequality through progressive policies that target wealth and corporate profits.
During a panel discussion moderated by Mathew Gbonjubola, Co-Chairperson of the UN Tax Committee, speakers explored the challenges and opportunities in strengthening domestic resource mobilization. Ramesh Narain Parbat, from India’s Ministry of Finance, highlighted successful financial welfare schemes linked to unique identification numbers, which have improved tax collection and reduced leakages. He pointed out that the current global tax system is outdated, as it still ties taxing rights to physical presence, failing to account for the realities of the digital economy.
Addressing Illicit Financial Flows in Africa
Chenai Mukumba, Executive Director of Tax Justice Network Africa, revealed that Africa loses between $88.6 billion and $100 billion annually due to illicit financial flows. These losses stem from multinational corporations exploiting loopholes in transfer pricing rules and tax treaties, which erode the continent’s tax base. Mukumba noted that this situation has forced many African governments to adopt regressive tax systems, disproportionately impacting lower-income populations while allowing high-net-worth individuals and large corporations to evade taxes.
She advocated for a UN tax convention to establish binding rules on corporate taxation and transparency, ensuring equitable decision-making power for all countries. Mukumba emphasized that African nations require a fairer share of taxing rights to reflect the economic activities occurring within their borders, suggesting a redesign of tax treaties to prevent excessive revenue losses.
Ben Dickinson, Deputy Director of the OECD Centre for Tax Policy and Administration, highlighted the importance of national sovereignty in tax matters. He noted that countries collaborate on taxation only when it aligns with their domestic policy goals. Dickinson also referenced the UNDP’s partnership with Tax Inspectors Without Borders, which has successfully helped countries generate over $2.4 billion in additional revenues.
While progress has been made in international corporate taxation, Dickinson cautioned that no single area of tax policy would suffice to mobilize the necessary revenue. He urged a comprehensive approach that includes value-added tax, personal income tax, social security contributions, and property taxation to meet global financial needs.
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