By Ezgi Arik
- Introduction
The Final Report of the Secretary-General on “Promotion of Inclusive and Effective International Tax Cooperation at the United Nations” was published on 26 July 2023. This blog post makes two observations with regard to the Report. First, providing clear definitions and criteria for inclusive and effective tax cooperation might enable all stakeholders to work towards a common aim. Second, strengthening the role of the UN in international tax cooperation might be challenging, considering the current dominance of the OECD. Nevertheless, the UN can strengthen its position through continuous knowledge production.
- Towards a unified approach to “inclusive and effective tax cooperation”
The Report emphasizes that there is a need to clarify how inclusive and effective tax cooperation would look like. With that purpose, it presents substantive and procedural criteria for inclusive and effective tax cooperation.
Substantive criteria [1]
The Report highlights the importance of supporting countries concerning their taxing rights to enable resource mobilization to achieve SDGs. It claims that the international tax system should provide flexibility considering the different needs of jurisdictions and be responsive to new developments. Additionally, international tax rules should be simple and easy to apply. Finally, the system should be stable to provide long-term options for businesses.
- Procedural criteria [2]
It is emphasized that procedural inclusive and effective tax cooperation requires the participation of all parties in rule-making, agenda-setting, debates, and transparent decision-making processes. In case disputes arise in the implementation or interpretation of tax rules, the disputes should be resolved in a principled and effective manner, either through domestic measures or international commitments. Such international dispute resolution procedures should also be agreed inclusively, especially considering to developing countries and the least developed ones.
Providing criteria and elements for inclusive and effective tax cooperation can positively affect reaching the desired way of tax cooperation and contribute to strengthening the role of the UN. Accordingly, each position will be analyzed in the following section.
- Achieving a common aim in international tax cooperation
Subjective concepts such as inclusiveness and effectiveness can be understood differently in different contexts and discourses. Accordingly, establishing a global approach to something that does not have a globally shared meaning comes with its own challenges. [1][3] In case that the aim is establishing a global approach to tax cooperation as the UN has, there is a need for concrete definitions and criteria for inclusive and effective tax cooperation. Although providing definitions can be considered a starting point for reaching the desired outcome, it does not guarantee that the common aim will be achieved. The knowledge provided by the UN should be supported and continuously developed to ensure that all stakeholders have a common understanding. Accordingly, although the criteria highlighted in the Report, such as flexibility, stability, simplicity, participation in rule-making, agenda-setting, and decision-making are clear for now, the UN should make sure that their meanings are coherently used in the upcoming documents.
Without establishing boundaries and clear explanations, working towards a common aim would be challenging. The challenge might be even more apparent in such a decentralized system such as the international taxation system, having various stakeholders. For instance, in case there is a lack of definition, one stakeholder could understand inclusive and effective tax cooperation as only a substantive requirement. In contrast, the other could understand it as including substantive and procedural requirements. Nevertheless, by clarifying that inclusive and effective tax cooperation would have both substantive and procedural requirements, the Report eliminates the possibility of such confusion among stakeholders.
Furthermore, another example could be given on how the OECD and the UN understand the concept of “inclusiveness” differently. Although the OECD has developed an “inclusive framework” and refers to “inclusiveness,” it is not clear how the OECD describes inclusiveness. [4] Unlike the OECD, the UN defines its understanding of inclusiveness and effectiveness. Based on these definitions, the Report concludes that the OECD instruments have not met the substantive and procedural criteria established in the Report (i.e., participation in norm-shaping, agenda-setting, and decision-making processes).[5]
- Gaining power in international tax cooperation through knowledge production
Currently, the OECD holds an over-privileged position in international tax discourse due to its vast knowledge production through, e.g., the OECD Model Convention, the BEPS Action Plan, the minimum standards, and the Multilateral Instrument. As the OECD has a lot of technical knowledge on international taxation, continuous knowledge production through various instruments constantly recontributes to its already existing power. On the contrary, despite previous efforts on strengthening the UN’s role in international tax cooperation, the UN has been standing as an under-privileged actor in shaping international tax discourse. While it is still unknown whether the UN will be able to strengthen its role in international tax cooperation with the current UN Resolution, the UN Resolution followed by the Report of the Secretary-General seems promising in gaining power.
Power and knowledge production are considered interconnected, and as power produces knowledge, the production of knowledge re-contributes to power. [6] Accordingly, the more knowledge is produced, the more power will be gained. This has been the case in the long-lasting dominance of the OECD in international tax discourse. Nevertheless, by providing definitions and criteria for inclusive and effective tax cooperation in the Final Report of the Secretary-General, the UN made an essential step towards strengthening its role through knowledge production. The clarifications on the meaning of inclusive and effective tax cooperation in the Final Report will have a global reach, potentially resulting in a power increase of the UN in international tax cooperation. Accordingly, if the UN keeps producing knowledge via various instruments, it will contribute to its power in international tax cooperation.
- Recommendations for further strengthening the role of the UN in international tax cooperation
The UN Resolution and the Report of the Secretary-General have great potential to strengthen the UN’s role in international tax cooperation and create a globally accepted, inclusive, and effective international tax system. Nevertheless, although these documents can be a starting point for achieving this mission, the UN still has much to do to strengthen its position.
Accordingly, it is recommended that the UN should keep building a clear agenda and goals to work towards a common aim in international tax cooperation. To that end, continuous knowledge production is necessary to gain power in international tax discourse. This might be challenging given the current dominance of the OECD. Nevertheless, it is suggested that the UN should produce knowledge on the areas where it has a more robust position, such as the interlinkages between the immediate human rights perspectives such as right to food, water, education and the international tax practices.
Table 1: Situation of current instruments showing whether they met the inclusive and effective international tax cooperation criteria[7]
| The UN | The OECD | ||
| Substantive criteria | Yes | No | |
| Procedural criteria | Agenda-setting | No | No |
| Transparent decision-making | Yes | No | |
| Norm-shaping | No | No | |
| Implementation | N/A | Yes | |
| Dispute resolution | Mixed | Mixed | |
[1] United Nations, General Assembly, Promotion of inclusive and effective international tax cooperation at the United Nations: Report of the Secretary-General, ¶ 10-12, U.N. Doc. A/78/235 (26 July 2023) [hereinafter Report of the Secretary-General], available from https://financing.desa.un.org/sites/default/files/2023-08/2314628E.pdf.
[2] Id. para. 13-18.
[3] It should be noted that it does not mean that every concept in international taxation should have a single commonly understood meaning. However, the possible difficulties of this on reaching a common goal should be acknowledged. For instance, there is no consensus on the concept of fairness in international tax discourse, and this issue raised some concerns in the literature. See e.g. Paul Lamberts, Fair Taxation: Truth is in the Eye of the Beholder, 45 INTERTAX 49 (2017); Irene Burgers & Irma Mosquera Valderrama, Fairness: A Dire International Tax Standard with No Meaning?, 45 INTERTAX 767 (2017); Filip Debelva, Fairness, and International Taxation: Star-Crossed Lovers?, 10 WORLD TAX J. 563 (2018); Yvette Lind, Introduction: A Contemporary Guide to Tax Justice and Tax Fairness, 1 NORDIC TAX J. 1 (2021).
[4] Allison Christians & Laurens van Apeldoorn, The OECD Inclusive Framework, 72 BULL. INT’L TAX’N 226, 231 (2018).
[5] Report of the Secretary-General, supra note 2, paras. 31-46.
[6] MICHEL FOUCAULT, DISCIPLINE AND PUNISH 78 (Alan Sheridan trans., 1995) (1977)(ebook).
[7] The table is prepared based on the Report of the Secretary-General, supra note 2, paras. 20-46.