What you need to know:
- The outcome of the vote signifies that, despite the odds, the reform of the multilateral financial system is not an unrealistic pursuit.
- The resolution also suggest that such a reform has a better chance of success if the UN’s role as the premier platform for global governance is reaffirmed.
A rare piece of good news at a time of turmoil has emerged from the UN in New York. An overwhelming majority of the member States voted for a resolution tabled by the Africa Group, spearheaded by Nigeria, authorising the negotiation of an international tax convention within the framework of the global body.
The resolution received 125 votes with all the members of the Africa Group, except those absent during voting (Mauritius, Somalia and Sao Tome-Principe), voting affirmatively. Only 48, mostly developed countries, voted against it. Nine other States abstained.
This divide in many ways mirrors the gap between the Global North and the Global South over the UN General Assembly Resolution over the New International Economic Order (NIEO). This becomes apparent from comparing the voting pattern on the NIEO resolution last year and their voting on the latest one.
Underscoring the significance of this resolution, Nigeria’s Permanent Representative to the UN Tijjani Muhammad-Bande pointed out that the "resolution is not just a policy document; it is a testament to our collective resolve for a fairer, more resilient, global economy".
Ahead of the voting, the Chairperson of the Africa Group for November, Zambia’s Permanent Representative to the UN, Dr Chola Milambo, told a press conference: "This convention is about humanising our approach to global economics. It is about creating a system that serves not just economies but the people at the core."
This UN tax convention is expected to establish a just global tax regime that significantly limits, if not totally eliminates, the conditions that facilitate illicit financial flows and related tax avoidance practices that rob countries of revenues much needed for financing development.
According to the Tax Justice Network’s "State of Tax Justice 2023" report, countries might lose $4.7 trillion in tax revenue over the next decade due to underpayment of taxes by multinational corporations and wealthy individuals.
Despite this being a global phenomenon, the developing world bears the brunt of it. The magnitude of the loss for Africa was laid bare by the report of the Uneca and AU joint High-Level Panel on Illicit Financial Flows headed by former South African President Thabo Mbeki.
The report estimates that Africa loses more than $50 billion annually to IFFs (which UNCTAD revised in a 2020 report to about $90 billion).
Ahead of the adoption of the resolution, the Africa Group leading the charge faced major push back. Dr Milambo appealed to the OECD, US, EU and UK "for your understanding for our shared humanity", stating that ‘This convention is not just a fiscal tool" but "a lifeline to millions who aspire for better health care, education and a life of dignity".
Prompted by the concern that progress on this issue could be derailed by a bitter dispute over the appropriate forum for tax negotiation between OECD and the UN, President Mbeki, in an editorial published on the Financial Times, also called on the countries resisting the process "to join the majority of UN member states, which represent the bulk of the world's poor, and vote to sit at the same table as the representatives of the developing countries".
It is after years of effort that this feat was accomplished during the November 22 vote. The immediate background to this resolution was another resolution that the Africa Group proposed and was adopted by consensus in the General Assembly in October 2022. That resolution on "Promotion of inclusive and effective tax cooperation at the United Nations" tasked the UN Secretary-General to prepare a report analysing all relevant international legal instruments, other documents and recommendations.
In his report, the UN Secretary-General noted that "the substantive rules developed through these OECD initiatives do not adequately address the needs and priorities of developing countries and/or are beyond their capacities to implement".
Accordingly, he proposed that ‘the role of the United Nations in tax-norm shaping and rule-setting...appears the most viable path for making international tax cooperation fully inclusive and more effective".
The outcome of the vote signifies that, despite the odds, the reform of the multilateral financial system is not an unrealistic pursuit. As Kenya’s Permanent Representative to the UN Martin Kimani, remarked, "Tax justice is at the heart of equitable international financial reform".
The resolution and its promise also suggest that such a reform has a better chance of success if the UN’s role as the premier platform for global governance is reaffirmed. Its adoption signals that most member states still consider the UN as the platform for addressing the multiple and intersecting challenges the world faces.
Thus, despite Richard Gowan’s apt depiction in a recent Foreign Affairs article of how the world lost faith in the UN, one agrees with Ghana's Founding President Kwame Nkrumah’s view that "although confidence in the United Nations has suffered several shocks since its foundation... it remains the only world organization in which the many problems of the world have a chance of finding reasonable solution".
Dr Dersso is the founding director of Amani Africa. @SolomonADersso