OECD and UN tussle for control over international tax affairs

A war of words has broken out between the OECD and the UN ahead of a meeting next month that will debate how the New-York based organisation could play a larger role in international tax affairs.

The Paris-based OECD has led discussions for decades but it has increasingly faced criticism from developing countries, such as Nigeria and India, which argue its global tax policies favour the richer economies that make up its membership.

A report published earlier this month by UN secretary-general António Guterres backed developing economies’ complaints, saying the OECD’s initiatives did not “adequately address the needs and priorities” of countries other than advanced economies. Guterres said the UN should have a greater say in global tax affairs to make co-operation between nations “fully inclusive and more effective”.

A debate on developing a new global framework for tax policy will take place at the UN General Assembly, beginning on September 18.

Manal Corwin, head of tax at the OECD, hit back at the report, saying it contained a “number of inaccuracies and misleading statements”.

She also told the Financial Times it was “disappointing that the UN had chosen to ignore the positive impact of the most significant changes and concrete results that have been delivered over the last two decades”.

Corwin listed the OECD’s facilitation of automatic exchange of information between countries, which had brought in nearly €126bn in additional tax since 2009 — including €41bn for developing countries — as one of these.

The UN, however, believes many of the OECD’s policy prescriptions disregard developing economies, saying it was often “beyond” poorer countries’ tax administration capacities to implement such measures.

Those prescriptions include the landmark OECD-brokered global deal to clamp down on corporate tax avoidance. The UN claimed the impact outside the rich world would be “minimal especially when compared to the cost of implementation”. More than 130 countries signed up to deal in the autumn of 2021, though it has yet to be fully ratified.

Following the September debate, discussion will move to a UN committee from October. Recommendations will be subject to a vote at the general assembly by the end of the year. 

Experts said it would mark a significant shift were the UN to gain more influence on global tax, particularly given the OECD’s existing expertise. However, rapid changes in the international tax landscape — such as developing economies in Latin America and Africa combining forces more often — meant that it could occur.

“The possibility of a larger role in international tax for the UN must be taken seriously,” said Will Morris, global tax policy leader at PwC.

Corwin said she did not want to “fuel rhetoric” of a rivalry between the two organisations and that the OECD was concentrating on getting concrete results for countries, not “unnecessary competition between organisations”.

She added: “We’re not saying everything’s perfect. But you have to acknowledge the really significant progress that has been made.”

When asked for a response to Corwin’s comments, the UN said the secretary-general did not normally provide additional explanations on reports that had not yet been formally submitted to member states.

But Stéphane Dujarric, Guterres’ spokesman, added the report was “not about criticism of any organisation or competition between them”.

“It is about giving all governments, as they have explicitly requested, additional options for making international tax co-operation fully inclusive and more effective,” he said, adding that the report was “just an honest assessment, based on wide-ranging inputs and multi-stakeholder consultations”.

The report was commissioned following a resolution adopted by the UN general assembly, at the request of African nations last year. This followed criticisms from several developing countries that the OECD’s global tax deal was biased in favour of developed countries’ interests.

The Intergovernmental Group of Twenty-Four (G-24) developing countries has backed the UN’s call for a greater role in global tax. Its director, Iyabo Masha, told the Financial Times: “The G-24 supports a transparent, equitable global tax negotiation led by a universal body that will foster fairness for developing nations, enhance state accountability and elevate sustainable development in global tax discussions.”

However, the public submissions to the UN report showed several business representatives and developed countries — including Australia, Japan and the UK — backed existing arrangements led by the OECD.

PwC’s Morris said businesses were concerned at a potential “fracturing” of global tax affairs, he said, despite an awareness that the OECD’s 2021 global deal “clearly” advantaged larger, more developed countries.

“What [businesses] would like to see is a process which achieves a true consensus between as many countries as possible,” he said, adding that while the OECD process had not achieved that, the UN may struggle to find a compromise between advanced and developing economies too.