Sponsored by the Africa Group at the UN General Assembly, the resolution provides that multinationals will pay at least 15 percent of the profit in taxes to the countries the do business in.
There is skepticism
over the practicability of a new United Nations resolution on international tax cooperation that promises
to save billions of dollars that African and other developing countries
lose annually to tax-evading multinationals.
The resolution approved by consensus at
the 77th session of the UN General Assembly last week has been
described as the first step towards an inclusive, democratic, and
transparent process to reform global tax terrain.
Nigeria and sponsored by the Africa Group at the UN, the resolution
provides that multinationals will pay a minimum of 15 percent of the
profit in taxes to the countries they do business in.
takes away the privilege of discussing global taxation matters from the
OECD (the Organization for Economic Cooperation and Development) a
38-member country "rich man's" club, to the more inclusive UN.
For long, the developing world has been grappling with the idea of taxing multinationals that do online or cyber-based businesses in the countries without having physical establishments there.
Global Tax Justice Network called this a triumph for Africa and the
developing world, which, for more than two decades, have been calling
for an intergovernmental tax negotiation process at the UN, to allow all
countries to participate in discussions and decision-making on an equal
Jolly Mutesi, an International Tax Legal Officer at
Uganda Revenue Authority said the Convention was needed and had taken
too long to come.
She said businesses and the way of doing business had long changed and the existing systems needed overhauling.
said the multinationals and the developed countries have taken
advantage of the agreements they signed with the poor countries decades
ago to avoid paying taxes even where they should.
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convention, if implemented, will also do away with tax havens,
countries which have eased tax policies to attract investments, but are
now used to store proceeds from illicitly acquired profits.
at a dialogue organized by SEATINI Uganda in Kampala, Economic
Consultant, Dr Fred Muhumuza, was doubtful about tax havens.
He says new tax havens were being created in the form of Financial Centres around the world, especially in developing countries.
also doubted the capacity of African countries to tax digital
business operations, urging for real action to build capacity.
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questions being asked include whether the African countries can
adequately access the information needed to ably enforce their rights
under the resolution.
Gerald Namoma, a senior economist in the
Tax Policy Department at the Ministry of Finance, Planning, and Economic
Development, hoped the developed countries would also seek to benefit
from the move, especially against tax havens.
In this way, they would set mechanisms to implement this, enabling African countries to also benefit.
said the global minimum tax policy is because the countries have also realized that they are losing business to tax havens, a situation they
had ignored for a long despite advice from the developing world.
however, stressed the need for the country to do real capacity building
including for personnel and infrastructure to be able to meet the
demands of international negotiations.
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for reforms in the global economic policies that currently benefit the
developed world welcomed this unanimous decision which is expected to
tackle illicit capital flight.
“This is a historic win for tax
justice and the broader economic justice movement and a big step forward
to combat illicit financial flows and tax abuse,” said Dereje
Alemayehu, Executive Coordinator of the Global Alliance for Tax Justice
The Tax Justice Network Africa (TJNA) said this
should build a fair and effective international tax system arising from
an inclusive process at the UN.
"This resolution heralds a great
opportunity for all UN Member States to move beyond words to action for
the much-needed reforms of the global financial architecture,” said
Chenai Mukumba, Policy Research, and Advocacy Manager at TJNA, just after
Developing countries are said to lose at least 483
billion dollars annually in corporate tax abuse, yet they are not
allowed to participate in the decision-making processes on global tax
matters, which have been a preserve of the OECD.
Senior Tax Manager at consulting firm, PricewaterhouseCoopers, said the
inclusivity objective of the convention would most likely trickle down
to the national tax policy system including wide consultations and
research before tax-related laws and policies are made.
This is because the process will be at an international level with implications on global trade and investment.
said while previous national treaties with other countries could have
been necessary at that time, the situation has changed and it was time
to move on in the way tax is administered.
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This now starts the negotiation of a UN Framework Convention on International Tax Cooperation through an inclusive process.