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Investors Should be “Voice of Reason” on Global Tax

Too many cooks in the kitchen could overcomplicate efforts to ensure fairness and transparency of new rules.   

Investors and businesses have an important role to play in pushing for political cohesion on the establishment of a fair and clear global tax system.  

There has been ongoing tension between the UN and the Organisation for Economic Cooperation and Development (OECD) around which body should be responsible for reform efforts, as the OECD continues its implementation of Pillar One and Pillar Two of its global tax reform. Meanwhile, developing countries have been calling for more involvement and representation on global tax rules through the establishment of a UN convention on taxation. 

“The real concern for businesses and investors should be to find a way to avoid the possibility of political disputes or complications,” Christopher Morgan, Head of Tax Policy at KPMG, told ESG Investor.   

“They should try to be the voice of reason and make it clear that everyone wants the same thing: a fair and simple global tax system.”

On that basis, all concerned parties could come together to agree on which entity should be in charge – even if it transpires that the OECD focuses on one area, and the UN on another, Morgan added. 

One of the biggest sticking points, he explained, is that the OECD is commonly perceived as “a rich man’s club” setting the agenda for the global reform framework by some developing markets – despite developing markets typically being the most effected by aggressive tax practices.   

In a recent report, international charity ActionAid noted that tech giants Google, Facebook and Microsoft had avoided US$2.8 billion in tax in developing countries in 2020 – a whopping sum that could have been used to tackle the pandemic in those regions, among other things. 

“The emergence of a UN tax body could be complementary to the OECD framework and better represent the interests of the Global South,” said Rachel Owens, Director of Climate Finance Programmes at the European Climate Foundation.   

Keeping it simple 

The proposal for the promotion of inclusive and effective international tax cooperation was tabled last year by the African Group, which called for the launch of an open-ended ad-hoc committee to design a comprehensive UN Tax Convention, led by all UN member states. The deadline for completing the convention is June 2025. 

Despite counterproposals filed by the likes of the UK and US, the resolution passed with 125 votes in favour last year. The US, UK and all EU member countries voted against the resolution.  

“The push for the UN to take control has continued on the basis that every country would have a right to join in [discussions and decision-making],” said Morgan. “But an increased involvement from developing countries does not mean the process of global tax reform will get any easier or fairer.”   

Part of the difficulty of elevating such issues to the UN, he added, is getting everyone on side.  

The multiplicity of interests, economies and cultures, even among developing countries alone, makes it unlikely for there to be one obvious solution.  

“For investors and corporates, there is also the potential downside of being seen as the ‘bad guys’, and the ones who can just be milked for more tax,” Morgan continued.  

“We don’t want [tax reform] to become a fight between developed and developing countries, with business caught in the middle.” 

To that end, deliberations around future reforms should remain focused on ensuring that taxes are applied fairly, and that the rules are simple to follow. 

Adding to an already long list of initiatives in the space, a new climate tax taskforce was launched during COP28, with a mission to develop global levies for some of the world’s most carbon-intensive industries over the next two years.   

“It is critical that this new initiative doesn’t take bandwidth and oxygen away from [the UN and the OECD],” commented Franziska Mager, Senior Researcher and Advocate on Climate and Inequalities at the Tax Justice Network. 

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