The aim is to help nations around the world boost their economic growth and achieve the 2030 Agenda for Sustainable Development and its 17 goals.

Here’s what you need to know now about the UN Tax Convention and what it means for people around the world:

Why is a new convention important?

A UN tax agreement represents a fundamental shift in the way international taxation is handled and could have significant implications for the architecture of global financial systems and the way taxpayers’ money is used for the common good.

For this reason, the UN Ad Hoc Committee to draw up the Rules of Procedure for a UN Framework Convention on International Cooperation in Tax Matters concluded its second session by adopting a package of guidelines for the new treaty, thereby taking an important step towards the establishment of a legitimate, fair, stable, comprehensive and effective international tax system.

More comprehensive and effective international tax cooperation is crucial to enable countries to respond to existing tax-related challenges – from digitalisation to the global activities of large multinational companies – and to mobilise domestic resources and use their tax policies for sustainable development.

To reduce global dependence on coal and oil, increased investment in solar, wind, hydropower and biomass is crucial.

What will a UN tax treaty cover?

According to the terms of reference of the Ad Hoc Committee, a UN framework convention should, among other things, create a system that is inclusive, fair, transparent, efficient, equitable and effective for sustainable development.

This includes the use of approaches that contribute to the achievement of sustainable development in three dimensions: economic, social and environmental.

In addition, the Framework Convention should contain commitments to achieve its objectives, ranging from fair taxation of multinational enterprises to combating tax evasion and avoidance by wealthy individuals – and ensuring their effective taxation in the Member States concerned.

At the same time as the Framework Convention, two legally binding protocols should also be drawn up. One of them deals with the taxation of income from the provision of cross-border services in an increasingly digitalised and globalised economy.

How can a UN tax agreement help the Global South?

An inclusive system of tax cooperation can adequately address the challenges of strengthening domestic resources to enable all countries to finance and promote actions consistent with the 17 Sustainable Development Goals (SDGs).

“Only an inclusive international tax system will be legitimate and effective,” said Junhua Li, Under-Secretary-General for Economic and Social Development, at the opening of the ad hoc committee meeting.

A global tax agreement would ensure that large multinational companies pay their fair share of taxes, regardless of where they operate. It is expected to generate significant additional tax revenues for many countries, particularly those in the global South.

“The livelihoods and futures of billions of people depend on governments’ ability to finance basic infrastructure, education, health services and climate action,” said Under-Secretary-General Li.

According to the UN, progress on half of all SDG targets is weak and insufficient.

Is there consensus on a global tax agreement?

NO.

Developing countries largely support the plan, but some industrialized nations have expressed reservations, as the vote in the ad hoc committee on Friday showed.

A total of 110 member states voted in favour of the provisions of the new treaty. 44 countries abstained and eight countries (Australia, Israel, Japan, Canada, New Zealand, the Republic of Korea, the United Kingdom and the United States) voted against.

The UN Ad Hoc Committee to draft the Rules of Procedure for a UN Framework Convention on International Cooperation in Tax Matters has voted to submit to the General Assembly guidelines for the development of a global UN tax treaty.

How do we proceed?

The rules of procedure of the ad hoc committee will be forwarded to the General Assembly, which will vote on them during the world body’s 79th session, which begins in September.

If adopted, the Assembly would have the Convention and two Protocols drafted by a Negotiating Committee chaired by Member States, which would meet annually for the next three years. The Negotiating Committee would then submit a final text to the General Assembly for consideration in the first quarter of the 82nd session, as per the provisions.

This would mean that all 193 UN member states could vote on a final UN global tax treaty in 2027. The UN treaty would require a two-thirds majority in the General Assembly to be adopted. It would then be submitted to all member states for signature and ratification.