What if…there was a world tax organization?
They say only death and taxes are certain, but we know for sure that tax avoidance and evasion cause needless death. The half a trillion dollars of revenue lost per year worldwide supercharges inequality and represents the biggest obstacle to progressive taxation. Reverse this, and each year 17 million more people could benefit from clean water, and 34 million from basic sanitation. Over a 10-year period, that could help prevent 600,000 child deaths.
The group of rich countries who dominate the setting of international tax rules and standards are also responsible, through the financial secrecy they provide and the profit shifting they facilitate, for the great majority of cross-border tax abuse. None more so than the UK, with its ‘spider’s web’ of Overseas Territories and Crown Dependencies.
But there is a practical, possible alternative to this enduring injustice: a global intergovernmental tax body under the auspices of the United Nations.
Over the years there have been calls for a ‘World Tax Organization’ – a global body tasked with ensuring that fair and effective rules apply to tax, similar in mandate to the World Trade Organization.
The closest we have at present is the snappily titled UN Committee of Experts on International Cooperation in Tax Matters – a group of individuals nominated by UN member countries. Importantly, these people are not political representatives. This allows the committee to bring forward technical solutions for tax issues but not to establish political agreement between states.
Political negotiations on tax have also taken place at the Organisation for Economic Co-operation and Development (OECD), which was established in the 1960s. This club of rich imperial powers and settler states objected to attempts by lower-income countries, many newly independent, to set rules for transnational companies at the UN. Tax rule setting was therefore brought firmly into the OECD and all attempts to regulate tax at the UN were blocked.
From the 1990s, the magnitude of cross-border tax abuse exploded. Just five per cent of US transnationals’ global profits were shifted to tax havens in the early part of the decade; this grew to exceed 25 per cent by the early 2010s and is still climbing.
Combined with tax evasion by individuals and undeclared offshore assets, the estimated global revenue losses amount to $483 billion. OECD member countries lose the most in absolute terms, but lower-income countries lose the greatest share of their existing tax revenues – and therefore their public expenditures.
There is an answer to these challenges, learning from what has been done so far. Last year, the UN’s high-level Financial Accountability, Transparency and Integrity (FACTI) Panel delivered its final report, and recommended the adoption of the policy platform that the Tax Justice Network, and the broader movement, have created over the last two decades. It can be summarized as three main elements: first, full introduction of an ‘ABC’ of tax transparency that would largely end bank secrecy and anonymous wealth, while tackling the opacity of multinational companies.3 Second, a move to unitary taxation which would end most current tax abuse by transnationals.
Last, but far from least, is reform of the international architecture. Solutions to tax abuse are known but not implemented due to the disproportionate power wielded by tax abusers within the OECD structures that set the rules – from the transnationals and professional tax advisers who enjoy a revolving door relationship, to major tax havens like the UK and US who dominate decision-making.
The OECD’s current proposals on corporate tax, 10 years in the making, have been widely derided because almost all the benefits would accrue to its biggest members. The OECD’s failure to deliver on its mandate from the G20 – to reduce corporate tax abuse – is spurring calls for change.
In May 2022, the African Union’s conference of ministers – representing more than a quarter of UN member countries, and a sixth of the world’s population – called on the UN to begin negotiations on a tax convention. This would establish inclusive standards and create an intergovernmental tax body for future rule-setting – a World Tax Organization. The momentum may soon be unstoppable.