EU still trying to water down UN tax convention, despite research pointing to billions in new revenue

EU countries are trying to limit the ambition of a new UN tax convention during negotiations in New York, despite research indicating that the agreement could generate billions of euros in additional tax revenue for them. Ahead of the two-week negotiating round in New York on the so-called UN Framework Convention on International Tax Cooperation, research by Tax Justice Network, an NGO, and Public Services International, has estimated that the UN’s commitment to switch from “pay-where-you-say” to “pay-where-you-play”, currently contained in Article 5 of the draft convention, would raise $500bn in additional tax revenues. That would see EU countries collect enough to quadruple spending on climate adaptation in agriculture, energy and transport – including €3.7bn for Spain and €22.4bn for France, according to the research. The reform would also enable the Global South to collect more in a single year than the entire amount owed by Global South countries to the IMF in outstanding loans. The new study estimates how much tax countries would bring in under the UN’s commitment to change how countries determine where a multinational corporation pays tax on its profits. Countries currently rely on a 100-year-old “pay-where-you-say” approach set up by the League of Nations, which requires governments to tax multinational corporations’ profits based on where they declare them The UN tax convention’s commitment would replace the existing “pay-where-you-say” model with a “pay-where-you-play” approach, which taxes multinational corporations’ profits based on where they actually do business. The creation of the UN convention was supported by a wide majority in November 2023 but opposed by a small group of wealthy states including the US, UK and Japan, while the EU-27 abstained en bloc. The current negotiating round opened on 3 August and concludes on Friday (13 August). Though the EU has been an active participant in the negotiations – unlike the US, which walked out of the convention and demanded others do the same - most of the ambition is coming from African and Latin American delegates demanding structural reform of international taxation. Ireland, speaking for EU member states, said that the convention should explicitly recognise the existing international tax architecture, ensuring complementarity with existing agreements and improving legal certainty. The EU position has also sought reassurance that existing treaty obligations, including those agreed between members of the Paris-based Organisation for Economic Cooperation and Development (OECD), which was formerly the world’s leading arbiter on tax policy, would remain unaffected unless countries agreed otherwise. Divisions between Global South and wealthy countries