Revised Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation 

On 18 July 2024, Mr. Ramy M. Youssef, Chair of the Ad Hoc Committee, introduced the Bureau’s proposal for the revised draft Terms of Reference (ToR) for a United Nations Framework Convention on International Tax Cooperation. This proposal follows the release of the "zero draft ToR" on 7 June 2024 and incorporates feedback from over 100 inputs from Member States and stakeholders. These inputs are available on the Committee's website in their original languages.

The twenty-member Bureau, after extensive consultation and collaboration, has prepared a revised draft ToR to serve as the basis for the discussions and negotiations during the Committee's Second Session. This session is scheduled to be held at the United Nations Headquarters in New York from 29 July to 16 August 2024.

The revised draft ToR aims to outline the essential parameters and mechanisms for a United Nations Framework Convention on International Tax Cooperation, aligning with General Assembly resolution 78/230. The objective is to provide guidance for the framework convention negotiations while maintaining flexibility.

SUMMARY OF THE REVISED DRAFT TERMS OF REFERENCE

• General Assembly resolution 78/230 emphasizes the need for a United Nations framework convention on international tax cooperation to enhance inclusivity and effectiveness.

• The framework convention aims to accelerate the implementation of the Addis Ababa Action Agenda on Financing for Development and the 2030 Agenda for Sustainable Development.

• A Member State-led, open-ended ad hoc intergovernmental committee was established to draft the terms of reference.

• The committee is to submit a report to the General Assembly at its seventy-ninth session, containing the draft terms of reference.

• The committee now recommends the following draft terms of reference for consideration.

OBJECTIVES

The framework convention should include a clear statement of its purposes:

• Establish fully inclusive and effective international tax cooperation in terms of substance and process.

• Create a governance system for international tax cooperation to address current and future tax challenges while respecting Member States' tax sovereignty.

• Develop an inclusive, fair, transparent, efficient, equitable, and effective international tax system for sustainable development, enhancing legitimacy, certainty, resilience, and fairness, while strengthening domestic resource mobilization.

PRINCIPLES

The framework convention should outline guiding principles:

• Be universal in scope, considering the diverse needs, priorities, and capacities of all countries, especially those in special situations.

• Recognize the sovereign right of each Member State to decide its domestic tax policies, ensuring these do not undermine other Member States' tax systems.

• Align with international human rights law and existing commitments under human rights conventions.

• Take a holistic, sustainable development perspective, integrating economic, social, and environmental policies.

• Be flexible, resilient, and agile to ensure equitable outcomes as global conditions evolve.

• Ensure fairness in the allocation of taxing rights, contributing to sustainable development.

• Provide simple and administratively feasible rules.

• Increase certainty for taxpayers and governments.

• Require transparency and accountability from all taxpayers.

SUBSTANTIVE ELEMENTS OF THE FRAMEWORK CONVENTION

The framework convention should include commitments on:

• Fair allocation of taxing rights, including equitable taxation of multinational enterprises.

• Effective taxation of high-net-worth individuals.

• Ensuring tax measures address environmental challenges.

• Effective transparency and information exchange for tax purposes.

• Effective prevention and resolution of tax disputes.

• Other necessary subjects to achieve the convention’s objectives.

CAPACITY BUILDING

• Respect for tax sovereignty implies inclusive and effective participation in international tax cooperation, requiring procedures that consider the different needs, priorities, and capacities of all countries, supporting them in norm-setting processes without undue restrictions.

• The framework convention should include provisions regarding the entities responsible for supporting Member States, especially developing countries, in building capacity on relevant international tax practices to ensure effective participation and implementation.

STRUCTURAL ELEMENTS OF THE FRAMEWORK CONVENTION

The framework convention should include the following elements: definitions; relationship with other agreements, instruments, and domestic law; review and verification; exchange of information; data collection and analysis; financial resources and mechanisms; Conference of the Parties; Secretariat; subsidiary bodies; dispute settlement mechanisms; and procedures for amendments and protocol adoption.

SPECIFIC PRIORITY AREAS FOR EARLY PROTOCOLS

Early protocols on specific priority areas should be developed simultaneously with the negotiation of the framework convention. Priority issues include:

• Taxation of the digitalized and globalized economy.

• Taxation of income derived from cross-border services.

• Tax-related illicit financial flows.

• Prevention and resolution of tax disputes.

• Taxation of high-net-worth individuals.

Future protocols might cover:

• Tax measures on environmental and climate challenges.

• Exchange of information for tax purposes.

• Mutual administrative assistance on tax matters.

• Harmful tax practices.

APPROACHES AND TIME FRAME FOR NEGOTIATION

• The framework convention should be elaborated by a Member State-led negotiating committee, convening in New York in 2025 and 2026 for multiple sessions, aiming to complete its work and submit the final text to the General Assembly for consideration at its 81st Session.

• The committee should negotiate the early protocols simultaneously with the framework convention, aiming to finish them within six months after the framework convention negotiation concludes.

• The bureau of the negotiating committee should consist of a chair, three vice-chairs, and a rapporteur, elected based on equitable geographical representation.

• Member States should ensure continuity in their representation and be fully engaged in the negotiation process.

• The committee should consider the work of other relevant forums, potential synergies, and the existing tools, strengths, expertise, and complementarity available in multiple institutions involved in tax cooperation.

SOURCE/ RECOMMENDED READ: 

• Revised draft ToR_18 July 2024.pdf (un.org)