It has long been a paradox that the rich countries whose professional services firms are responsible for most of the world’s cross-border tax abuse also write global tax rules. That, pleasingly, may not be the case in the future. Last month, developing countries at the UN won a historic vote to set up a tax convention, over the objections from the body that wields power today – the Organisation for Economic Co-operation and Development (OECD), a club of wealthy countries, including the US, the UK and Japan. This is a long-overdue and much-needed change. Poor nations’ ability to feed, educate and provide healthcare to their people is hobbled by illicit and hidden movements of capital worth billions each year.
The vote was overwhelming. More than 120 mostly developing countries, representing 80% of the world’s population, called for a “framework convention on international tax cooperation”. The UK, rather shamefully, tried to scupper the vote by bringing forward an amendment to strike out the word “convention” and remove the possibility of having a legally binding outcome. Thankfully, this attempt at wrecking the proposal failed. Critics say that many UN conventions are commendable, but they are more honoured in the breach. This misses the point. Having a tax convention is better than not having one; it allows pressure to be applied on governments to take ambitious positions and stick to agreed deals.
