Asian governments must play a greater role in UN tax negotiations

Charles Santiago, Jeannie Manipon and Chee Yoke Ling

Billions of dollars that could fund schools, hospitals, social protection and climate action are being lost every year as multinational companies shift profits out of the countries where they operate.

Yet, as the UN negotiates a new global tax framework that could help developing nations reclaim these revenues, Asian governments risk being left on the sidelines.

Representatives of 15 civil society organisations, trade unions, think tanks and parliamentary offices from Malaysia, Indonesia, the Philippines, Thailand, India, Nepal and Pakistan, who met in Kuala Lumpur on 27-28 October, are calling on Asian and Asean governments to urgently step up their engagement in the negotiations for a UN framework convention on international tax cooperation.

The new framework presents a historic opportunity to secure a fairer share of global tax revenues for the developing world.

Following our meeting to review and strategise on the negotiations, we are deeply concerned that the voices of Asian governments, particularly those from the developing Global South, remain insufficiently represented in shaping the future of international taxation.

The stakes could not be higher. The UN negotiations present a historic opportunity to transform an international tax system that has long been dominated by the Organisation for Economic Co-operation and Development (OECD) into one that is fairer, more inclusive and responsive to the development needs of all nations.

For decades, developing countries have been denied a fair share of the tax revenues generated within their economies.

Multinational companies continue to exploit gaps in international tax rules to shift profits to parent companies in the Global North and low-tax jurisdictions, depriving countries where economic activity takes place of vital public revenue.

The proposed UN tax convention offers an unprecedented opportunity to change this.

A central principle of the negotiations is that countries should be able to tax profits where goods and services are produced and distributed.

This is particularly important for developing economies, which must mobilise domestic resources to finance their social, economic and environmental development.

The potential gains are substantial.

According to a report by the Tax Justice Network (TJN) and Public Services International (PSI), Malaysia could recover an estimated $479m annually in tax revenue currently lost through multinational profit shifting.

Indonesia could gain about $9.5bn, the Philippines $5.7bn and Thailand $2bn.

Globally, close to $500bn in tax revenue is lost every year.

Why, then, are our governments not doing more to shape the negotiations?

The UN process represents the most significant opportunity in decades to establish a genuinely inclusive global tax system.

Unlike the OECD framework, which was largely developed by a group of wealthy countries, the UN process provides every country with an equal opportunity to participate in shaping the rules that govern international taxation.

The proposed convention could establish a fairer distribution of taxing rights, strengthen the taxation of cross-border and digital services where they are used, address the taxation of the super-rich and curb the practice of multinational companies shifting profits out of the countries where they operate.

With the rise of the internet and the exponential growth of cross-border digital services and e-commerce, which now affect practically every sector of the economy, it is of the utmost importance that developing countries commit to the UN process.

Yet many Asian governments continue to rely on the existing OECD framework, despite its limitations and the unequal power dynamics that have shaped international tax policymaking.

We therefore call on governments across the developing South, particularly Malaysia, Nepal, Pakistan, Bangladesh and Thailand, to actively participate in the forthcoming UN negotiations in Nairobi, scheduled for 30 November to 10 December.

Asian governments must work collectively to ensure that the new global tax regime reflects their economic realities, development priorities and the interests of their people, as this is a question of economic justice, national sovereignty and the ability of governments to deliver essential public services.

Issued by:

• Charles Santiago, Monitoring Sustainability of Globalisation
• Jeannie Manipon, Asian People’s Movement on Debt and Development
• Chee Yoke Ling, Third World Network

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