India along with 125 countries have voted in favour of a resolution calling for a ‘UN tax convention’.
About the resolution
- The resolution was passed in the ratio of 125:48 at the UN General Assembly in New York on November 22.
- The resolution was tabled by the African Group under the title: “Promotion of inclusive and effective international tax cooperation at the United Nations”.
- Prominent OECD members like the US, UK, Netherlands, Switzerland, Japan, France, Germany voted against this resolution.
- The resolution proposes the establishment of an ad-hoc inter-governmental committee comprising no more than 20 member states.
- Unlike the OECD’s Inclusive Forum, which is not an inter-governmental body, this committee aims to bring together OECD and non-OECD members for collaborative efforts.
- The initial step involves reaching an agreement on the terms of reference. Subsequently, the second step entails the development of a UN Framework Convention on international tax cooperation.
- The new arrangement seeks to achieve a fair distribution of taxes to source jurisdictions, benefiting countries like India and the developing world through the establishment of global consensus on fair and equitable international tax rules.
- The current international tax rules are perceived as favoring capital-exporting countries.
- It is being considered a historic move to shift the reins of tax policy decision making from OECD to another, more equitably constituted, platform.
- Currently, OECD — a 38-member grouping dominated by rich nations — makes these decisions.
- While the OECD-led forums have explored the ‘Two-Pillar solution,’ some countries, including India, have raised concerns about the allocation of profits to source countries under Pillar One.
- According to a report, without the adoption of the UN tax convention, the world could lose nearly $5 trillion to tax havens over the next decade.
