UN Tax Convention Negotiations

*This is a summary of the document: "The Long Road to a UN Framework Convention on International Tax Cooperation" by the Global Alliance for Tax Justice. To read the full document please click here.

How the UN Tax Convention Process Began

Why global tax rules matter

Global tax rules determine who gets to tax multinational companies and wealthy individuals, and where. For decades, these rules have largely favored rich countries, leaving many developing countries without the revenue they need for public services, development, and climate action. The UN Tax Convention process emerged to change that imbalance.

1. Where international tax rules came from

International tax cooperation began in the 1920s, under the League of Nations. Early rules were designed mainly to prevent companies from being taxed twice on the same income. However, they were built around a key idea: profits should mostly be taxed where companies are headquartered, not where economic activity actually takes place.

This approach benefited wealthy, industrialized countries (where most multinational corporations are based) and limited the taxing rights of developing countries, even when profits were generated within their borders. These ideas were later embedded in bilateral tax treaties, many of which are still in force today.

After World War II, responsibility for shaping international tax rules shifted away from the UN and toward the OECD, a club of mostly rich countries. The OECD’s tax model continued the same basic approach, reinforcing rules that favor residence (headquarters) countries over source (activity) countries.

2. The limits of the OECD-led system

As globalization expanded, multinational corporations grew rapidly and learned how to exploit weaknesses in international tax rules. Using complex corporate structures and accounting techniques, many companies shifted profits to low- or no-tax jurisdictions, even when little real business happened there.

At the heart of the problem is the arm’s length principle, which treats subsidiaries of the same multinational as if they were independent companies. In reality, multinationals operate as single global firms, making it easy to manipulate internal prices and move profits artificially.

The OECD attempted to fix these problems through its Base Erosion and Profit Shifting (BEPS) reforms. But these efforts fell short because:

• Decision-making remained dominated by rich countries

• Developing countries had little real influence

• The reforms were extremely complex and hard to implement

• The system still failed to tax profits where real economic activity occurs

• Tax havens continued to thrive

The latest OECD reform package, known as BEPS 2.0, promised major change but delivered little. Its proposals were narrow, overly complicated, and provided minimal benefits to developing countries. Key parts of the reform are now stalled or unlikely to be implemented.

3. Growing demand for a UN-led alternative

Frustration with the OECD model led many countries (especially in the Global South) to call for a more inclusive and democratic approach under the United Nations.

Momentum grew during the 2015 UN Financing for Development conference, when developing countries demanded a stronger UN role in global tax governance. Although the proposal was blocked at the time, it sparked sustained advocacy by civil society and governments.

A major breakthrough came in 2022, when the Africa Group led a successful UN General Assembly resolution to explore new ways to strengthen international tax cooperation. This opened the door to a legally binding global tax agreement negotiated at the UN.

4. The birth of the UN Framework Convention on International Tax Cooperation

Between 2023 and 2024, UN Member States agreed to launch negotiations for a UN Framework Convention on International Tax Cooperation. In December 2024, they adopted detailed Terms of Reference, setting out the goals and principles of the process.

The Convention aims to build a fair, inclusive, transparent, and effective global tax system that supports sustainable development and gives all countries an equal voice in rule-making.

5. What the Convention aims to do

The UN Tax Convention aims to serve as a binding global framework, supported by specific protocols that address key technical issues. Two early protocols are being negotiated alongside the Convention:

• Protocol 1: Taxation of cross-border and digital services

• Protocol 2: Prevention and resolution of tax disputes

The Convention is expected to:

• Promote a fairer allocation of taxing rights

• Address tax avoidance and evasion by multinationals and wealthy individuals

• Strengthen transparency and information sharing

• Support sustainable development and reduce inequality

It will also establish a Conference of the Parties (COP): a permanent UN body where all countries participate equally in overseeing and updating global tax rules.

6. Where negotiations stand now

Formal negotiations began in 2025, with early sessions focused mainly on procedures. The Nairobi negotiations marked a turning point, as countries began discussing the substance of the Convention and how its commitments will be turned into concrete legal rules.

Negotiations are expected to continue until mid-2027, when governments aim to finalize and adopt the Convention and its first two protocols.

7. Why this process is historic

If successful, the UN Tax Convention would represent the most significant reform of international tax governance in over a century. It would shift global tax rule-making away from a system dominated by a few wealthy countries toward a universal, UN-led framework based on fairness, inclusivity, and accountability.

For many countries, this process is not just about tax - t is about economic justice, development, and sovereignty in a globalized world.