Implications for financial institutions and IFFs as UN votes to assume responsibility for global tax rulemaking from OECD

The United Nations (UN) General Assembly has adopted a resolution that mandates the UN to assume responsibility for rulemaking on global tax.

For sixty years the lead role for global tax rulemaking has been taken by the OECD, and the UN resolution may yet trigger a power struggle between the two organisations, with implications for global and local economies, businesses and financial institutions concerned with illicit financial flows (IFFs) for many years.

Duplication fears

Supporters of the resolution led by the Africa Group say the move could seriously curb IFFs and the decision is likely to mark the beginning of the end of the OECD’s reign as the world’s leading rule maker on global tax flows.

“This is a historic win for the tax justice and the broader economic justice movement and a big step forward to combat illicit financial flows and tax abuse,” executive coordinator of the Global Alliance for Tax Justice, Dereje Alemayehu, said in a statement responding to the resolution.

But countries in the 38-member OECD, which is primarily comprised of developed nations, were amongst those that supported a US amendment driven by concerns that the resolution could duplicate and potentially undermine existing OECD work at a crucial point in its implementation. The amendment was rejected by 97 votes with 55 in favour.

Future directions

The resolution opens the way for countries to begin intergovernmental discussions in New York over possible UN reforms to the global tax system, including the establishment of new UN bodies and mechanisms to evaluate, develop and decide global tax rules.

This includes the possibility of developing an international tax cooperation framework or instrument that is developed and agreed upon through a UN intergovernmental process, although the resolution does say it would be “taking into full consideration existing international and multilateral arrangements”.

The resolution tasks UN secretary-general Antonio Guterres with preparing a report analysing existing international arrangements, including the work of the OECD, and to recommend actions on the options for strengthening the inclusiveness and effectiveness of international tax cooperation.

The UN resolution for Promotion of inclusive and effective international tax cooperation at the United Nations can be found here.

 



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