Opinion: OECD tax policymakers should welcome UN competition

The UN competition could help make the OECD’s two-pillar solution viable in the developing world, where many governments rely heavily on corporate tax revenue.

The OECD’s proposals for a digital economy are part of a global plan, but it has to fit different circumstances and conditions around the world. A one-size-fits-all approach may not be practical, especially for countries with very different economic interests.

Tax policymakers in the OECD are pushing the mission to meet Pillar One by the summer. two day oecd conference This week will present the findings of a new impact study on Pillar One and Pillar Two.

This is a critical time when the success of pillar one will be determined, and it may also be the last time that the OECD can play such a role in international tax with very little competition.

Nearly four months have passed since the United Nations General Assembly unanimously agreed on 23 November, a Resolution Giving the organization a mandate to initiate intergovernmental negotiations on tax.

didn’t do the same important resolution Suggested a greater role for the United Nations in global tax, it also made the case for the United Nations Convention on Taxes and the creation of new global tax institutions and cooperation frameworks.

No wonder it was proposed by the African Group, which represents the 54-member African Union. The United Nations Convention to Combat Tax Evasion and Evasion can help developing countries better respond to the challenges posed by the digitization of the global economy.

The UN proposal poses a historic challenge to OECD dominance of international tax standards and could lead to a potential clash between the UN and the OECD, which has dominated the global tax landscape for 60 years.

In the worst outcome, this division could derail the two-pillar solution and push back global tax reform. A more optimistic view is that the UN and the OECD will be able to reach a synthesis; It doesn’t have to be an either/or.

alternative power station

The United Nations is a more open forum for emerging economies, as the OECD has only 38 member states. Many critics of the OECD from developing countries view the organization as a “club of rich countries”.

Of course, the OECD is not just made up of economies like the US and its European partners. Non-European members include Australia, Chile, Japan, Israel, Mexico, South Korea and Turkey.

Still, all but three of these countries are developed. Chile, Mexico and Turkey are the most isolated in the OECD, while important regional powers such as Brazil, China and India are still left out. But this may change.

The OECD has engaged more with developing countries on a two-pillar solution through an inclusive framework. In this way she managed to get the support of 137 countries for Pillar One and Pillar Two.

If the Brazilian government reforms its tax system, it can continue with OECD membership. And, if Brazil gains OECD membership, the Paris-based organization may begin to be viewed differently by critics because it will include a major Latin American country.

Meanwhile, India has increasingly turned to the United Nations Tax Committee as an alternative forum to the OECD for tax policy-making. Many African, Asian and Latin American countries support the UN move. But it is not the only option for such countries.

Colombia may be set to host the first Latin American Global Tax Summit in July. This conference can be an opportunity for the region to put forward its demands to the international community. Otherwise countries like Colombia could have drowned.

At the same time, China is developing its influence on tax policy through the Belt and Road Initiative (BRI). An example of this is Chinese support for BRI signatory states to create exclusive economic zones along the trade routes.

All this suggests that the future of tax will be more challenging than in the past. One way for the OECD to remain relevant is to continue its work with countries and blocs outside its membership and to deepen those ties.

OECD policymakers made history with the two-pillar solution, but there is still a lot of work to be done before the project is completed. The last statement in pillar one has to take into account the differences between developing and developed economies.

This is where the UN may be able to play an important role in ensuring the adoption of Pillar One by African, Asia-Pacific and Latin American countries, although this may be on their terms. The UN tax conference could be an opportunity for the OECD to ensure that its digital tax project is truly global.

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