India Votes For Shifting Global Tax Reins From OECD In The UN

In a major move in the UN, India votes for shifting global tax reins from the OECD. India is among 125 countries that voted in favor of a resolution calling for a UN Tax Convention. It would change the global tax scenario.

UN Global Tax Resolution [Credit-Mylnd.Net]

According to tax experts in India as well as at the global level, It is a historic move in the sense of a more equitable tax system that will shift the reins of decision-making from the OECD.

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WhyIndia Favors Shifting Global Tax Reins From OECD:

The OECD governs the current tax system globally. It is a 38-member group mainly dominated by rich countries, like the US, UK, Netherlands, Switzerland, Japan, France, Germany, etc.

According to Parmod Kumar, former vice president at the income-tax appellate tribunal, the current taxation rules are generally biased towards capital-exporting countries and the OECD perspective and their commentaries.

The OECD Forum [Credit-Finacial Times]

The OECD Forum works on the 'Two Pillar Solution.' Pillar one deals with taxation in the digital economy, the granting of tax rights, and the allocation of profits of MNEs to customer-based countries. Pillar two prescribes an effective minimum tax rate globally.

The OECD has an Inclusive Forum to deal with a range of issues. It is not an inter-governmental body but works together in collaboration with non-OECD member countries.

However, many countries like India have concerns about the method of allocation of profits to source countries under Pillar One. According to experts, the UN Framework could help developing countries get a better say.

The UN Convention on Shifting Global Tax Reins From OECD:

The resolution was passed by the UN General Assembly in a ratio of 125:48 in New York on Wednesday. The OECD member countries voted against the resolution while India, other BRICS nations, Brazil, Russia, and China voted in favor. African nations have tabled the resolution.

The UN Resolution Tabled By African Nations [Credit-Africa Tax Review]

The new UN resolution calls for the creation of an ad-hoc inter-governmental committee. There should be no more than 20 member states while taking into consideration gender and regional balance.

The OECD has an Inclusive Forum to deal with a range of issues. It is not an inter-governmental body but works together in collaboration with non-OECD member countries.

Under the new resolution, there is a two-step taxation formation procedure adopted. The first step is that within a year to reach an agreement on the terms of reference. The second step is to develop a UN Framework Convention on International Tax Co-operation.

A think tank, The Tax Justice Network, has welcomed the UN resolution. It assumed that the world would lose nearly $5 trillion to tax havens over the next decade if the new UN tax convention was not applied.

UN Convention For Global Tax Reins [Credit-Transit magasin]

After the adoption of the new UN tax convention, the inherent bias of current taxation towards the OECD would become much less relevant and provide the way to a new path.

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In the new resolution, a wide range of issues, like aggressive tax avoidance and evasion, illicit financial flows, recovery of stolen assets, and even taxation of the digital economy could be included in the reference term.

According to tax experts, practically the new arrangement will achieve a fair share of taxes to the source jurisdictions. The source jurisdiction means the customers-based approach like India. It would indeed provide the developing world with a global consensus on fair and equitable international tax rules.

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