United Nations Framework Convention on International Tax Cooperation, The Second Session is in progress 

Ad Hoc Committee to Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation, The Second Session is held from 29 July 2024 to 16 August 2024 at the United Nations Headquarters in New York.

Sessions can be viewed here:

• AHC on Tax, 2nd Session - WebTV Links | Financing for Sustainable Development Office (un.org)

PREPARATORY WORK

In line with the United Nations Committee's established timeline for inter-sessional work, aimed at preparing for its second and final session, Member States and other stakeholders were invited to contribute their input. These contributions were requested in response to the Bureau’s Proposal for the Zero Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation. 

Multiple countries, international organizations, civil society, and academia contributed with their input.

Here we summarize United States Feedback shared in preparation for the Second Session. 

COMMENTS OF THE UNITED STATES OF AMERICA

The United States has provided feedback on the zero draft of the Terms of Reference (ToR) for a United Nations Framework Convention on International Tax Cooperation, emphasizing the importance of balanced negotiation, compromise, and the inclusion of diverse viewpoints throughout the process. The U.S. comments are intended to offer both procedural and substantive insights that could help refine the ToR.

PROCEDURAL COMMENTS

Focus on Procedures Over Substance
The United States reiterated its position that the ToR should concentrate on the procedures for negotiating the Framework Convention rather than on its substantive content. According to the U.S., the substantive aspects should be determined by a future negotiating committee once it is established by the General Assembly. The U.S. suggests that procedural guidance should include clear decision-making processes, criteria for selecting substantive topics, and mechanisms to ensure that all Member States' perspectives are taken into account during negotiations. The U.S. also believes that the ToR should avoid imposing specific mandates on the negotiating committee, particularly in relation to topics currently listed as requirements in the zero draft. For example, the U.S. points out that paragraphs 7 to 10 and paragraph 14 list specific topics that the Framework Convention “should” address and recommends that these be presented as non-binding examples to maintain the flexibility of the negotiating committee.

Importance of Consensus-Based Decision-Making
The United States notes that the zero draft does not address the critical aspect of how a negotiating committee will make decisions. The U.S. strongly advocates for consensus or broad-based decision-making to ensure that any changes to international tax cooperation have global support. The U.S. urges that this topic be given significant attention in upcoming sessions and suggests that placeholder language be included in the updated ToR to acknowledge the need for consensus-based procedures.

Appropriate Sequencing of Negotiations
The United States believes that effective and transparent decision-making requires careful sequencing of negotiations. The U.S. expresses concern that simultaneous consideration of early protocols could create confusion and impede the negotiating committee’s ability to develop a coherent Framework Convention. The U.S. maintains that protocols should only be developed after the Framework Convention is in place, as they are just one of several mechanisms that could be used to address issues under the Convention.

Greater Transparency in the Process
The United States observes that the zero draft does not appear to fully reflect the diverse views expressed during the First Session. For instance, while decision-making processes were extensively discussed, they are not mentioned in the draft. Conversely, the draft includes the categorization of topics as “early” or “future” protocols without substantial discussion during the session. The U.S. believes that transparency in drafting the ToR is crucial to ensuring legitimacy and confidence in the process. The U.S. suggests that detailed agendas and summaries of discussions, as well as written recommendations and explanations from the Chair, could enhance transparency and structure in negotiations.

Consideration of Work in Other Fora
The United States refers to Resolution 78/230, which mandates that the Committee take into account the work of other relevant forums. The U.S. recommends that the ToR emphasize complementarity with existing processes to avoid duplication and fragmentation of international tax cooperation efforts. The U.S. notes that the specific placement of paragraph 6(d) of the Resolution in the zero draft suggests it is of lesser importance than other principles, which contradicts the intent of the Resolution. The U.S. believes that Member States deserve a written explanation of the reasoning behind this decision.

SUBSTANTIVE COMMENTS

Focus on Domestic Resource Mobilization
The United States notes the broad agreement among delegates on the importance of domestic resource mobilization yet observes that the zero draft mentions it only once and without sufficient emphasis. The U.S. believes that the UN has significant expertise in this area and that the Framework Convention could leverage this to support the Addis Ababa Action Agenda and the 2030 Agenda for Sustainable Development. While recognizing the views of other Member States on the need to consider broader objectives, the U.S. maintains that the impact on domestic resource mobilization should be a key consideration in negotiations.

Clarification of Substantive Topics
The United States points out that the zero draft includes terms and concepts that are open to multiple interpretations, which could complicate future negotiations. The U.S. highlights “tax-related illicit financial flows” as an example, noting that the term lacks a clear international definition, making it difficult to assess the obligations it might entail. Similarly, the U.S. expresses concern about ambiguous references to “equitable taxation of multinational enterprises” and “taxation of high-net-worth individuals,” arguing that such phrasing could lead to confusion during the negotiation process. The U.S. recommends that the ToR provide more clarity on these topics to ensure a common understanding among Member States and facilitate effective negotiations.

SOURCE/RECOMMENDED READ: 

• Second Session - Inputs | Financing for Sustainable Development Office (un.org)