GLOBAL TAX: Global tax cooperation moves forward with adoption of UN framework ToR

The Ad Hoc Intergovernmental Committee on International Tax Cooperation adopted the Draft Terms of Reference (ToR) for a United Nations Framework Convention on International Tax Cooperation in August 2024, marking a significant advance towards establishing a globally inclusive tax system. This development is crucial for addressing global challenges like tax evasion, avoidance, and illicit financial flows while promoting fairness, transparency, and sustainability in international taxation.

ATAF, in the service of its members, participated actively in the process. According to Mr Emmanuel Eze, ATAF Senior Advisor on Tax Policy, ATAF worked collaboratively with experts from its member states, the African Union, and other pan African organisations to ensure Africa’s effective representation. “Throughout the negotiation, ATAF offered technical support and vigorously canvassed for issues of key interests for its members in line with the mandate given to ATAT at the 7th Ordinary Session of the African Union Specialised Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration, to support African negotiators in the Committee. We are proud of our negotiators, the African Union, the Pan African Institutions and partners around the world for ensuring that the Terms of Reference addressed the diverse needs of all parties, including our continent,” Eze stated.

The ToR, developed under the mandate established by the UN General Assembly Resolution 78/230, outlined the objectives for creating a framework convention that will establish a fully inclusive and effective system of international tax cooperation. The framework will be responsive to current and future tax challenges, ensuring a governance system that upholds the principles of fairness, transparency, and equity.

Mr Thulani Shongwe, ATAF Head of Africa Multilateral Tax Cooperation, commented on what this milestone means for ATAF: “The adoption of the ToR is a testament to the collective effort and commitment of the international community to strengthen global tax governance. For ATAF, it is a significant achievement that aligns with our mission to support African nations in building effective tax systems. We look forward to continuing our work as we move into the next critical phase of negotiations.”

The framework convention will address issues such as fair allocation of taxing rights, tax-related illicit financial flows, and enhanced mutual administrative assistance in tax matters. Two early protocols are proposed alongside the convention: one focusing on the taxation of income from cross-border services in a digitalised economy and another addressing a priority area to be determined by the incoming Intergovernmental Negotiating Committee.

Recognising the varying capacities of member states, especially developing countries, the framework convention includes provisions for capacity building and institutional support. Mr Ignatius Mvula from the Zambia Revenue Authority who represented Zambia in the Committee, noted the importance of this inclusion: “This provision is vital for developing nations. It ensures that all countries can engage fully and effectively in the international tax system regardless of their current capabilities. It’s a step forward in levelling the playing field.”

The adopted ToR, pending approval by the UN General Assembly, will guide forthcoming negotiations, expected to begin in 2025. These negotiations, steered by a Member State-led committee, will continue until 2027, with the final text of the framework convention and early protocols presented to the UN General Assembly by the first quarter of its eighty-second session. ATAF congratulates its members and the broader international community on this historic achievement and urges members to prepare for the critical next phase of work.