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WORLD VIEW: Breaking the OECD hold on global tax governance

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Sir Ronald Sanders

By SIR RONALD SANDERS

“THE Organization for Economic Cooperation and Development (OECD) is nothing less than a Club of the world’s wealthiest countries which is determined to bend powerless countries to its will”. I wrote that statement in 2002 after four years of negotiations with the OECD against its unilateral imposition of a regime to counter what it called the ‘Harmful Tax Competition Initiative (HTCI)”, launched in 1998.

Unfortunately, in 2001, it succeeded in imposing its arbitrary HTCI, which killed the provision of global financial services by developing nations, including in the Caribbean, by threatening and imposing sanctions on countries that tried to stand up for their sovereign right to set their own tax levels. It was aided in this unjust action to establish itself as the only global rule maker on taxation, by the absence of a strong, united resistance from developing countries.

Since then, there has been no end to the OECD’s relentless – some may say, ruthless – efforts to control and dictate tax levels for the rest of the world. Today, the OECD, comprising 38 of the world’s 180 nations are still blacklisting countries that do not comply with the so-called “standards” that it sets, using a mechanism, euphemistically named, “The Global Tax Forum”, in which many developing states have become complicit in their own loss of autonomy on tax matters.

The 27 member states of the European Union (EU) are a powerful and important bloc in the OECD, outnumbering other countries by 11 votes. Among the other 11 members are the US, Canada, Japan, Australia and, sadly, Chile, Colombia, Costa Rica, and Mexico from Latin America. When the EU does not succeed in securing OECD endorsement of any of its ambitions, it implements its own.

In September 2000, Sir Lester Bird, the late Prime Minister of Antigua and Barbuda, whose country had battled courageously against the dictates of the OECD, declared in the UN General Assembly (UNGA) that OECD action on global taxation was contrary to international law. In this regard, he called on the OECD “to resolve to halt its insidious process and place any discussion on tax issues in this multilateral forum (the UN) where it rightly belongs”.

His call went unheeded. And, over the following 23 years, the OECD alone has dictated rules, regarding taxation. In the course of it, the financial services sector in developing states was decimated at a high cost, which continues to mount as the OECD instigates self-serving global directives.

Then, in 2022, fifty-four African nations, led by Nigeria, frustrated by the OECD’s stranglehold, successfully brought a resolution to the UNGA, recommending that the UN Secretary-General produce a report on “the promotion of inclusive and effective international tax cooperation at the United Nations”. Encouraged by the admission in the report that the UN has a role to play and its identification of three options that could be followed, the Africans submitted another Resolution, seeking to wrest control from the OECD.

The Resolution, entitled “Promotion of inclusive and effective international cooperation at the United Nations, was adopted on 22 November 2023 by a vote of 125 in favour, 48 against and 9 abstentions. Ten countries, surprisingly including Dominica and Venezuela, absented themselves.

Naturally, all 27 of the EU states voted against the Resolution. They were joined by the US, the UK, Japan and other countries with strong dependent, economic or military links to the OECD nations. However, it is notable that Mexico and Costa Rica – both OECD members – abstained from the vote.

The question is what happens now? One certainty is that the powerful states of the OECD will not allow international taxation to be taken from their control, by placing it in the UNGA. Even before the resolution was adopted on November 22, the big OECD countries had been working against it. That work will continue in their accustomed way – through coercion and inducements to break the resolve of the developing countries that so overwhelmingly voted for the Resolution.

The powerful states of the OECD have until Augst 2024 to once again divide and rule developing countries. By that time, an ad-hoc working group will have the responsibility to draft terms of reference for a UN framework convention on international tax cooperation. Undoubtedly, the big OECD countries will field their toughest negotiators; developing countries, including the Caribbean, need to do the same.

The large OECD countries are the principal advocates of the merits of competition in the provision of goods and services in the world because their industrial and agricultural capacity has reached the point where they need unrestricted entry to global markets to meet their expanding and increasing domestic financial challenges. But while they promote competition in the areas of their competitive advantage, they decry it in taxation which is the last frontier of autonomy for developing countries.

Already the big OECD countries are disparaging the Resolution, desperate to make it fail when it is considered by the UNGA in 2024. The language being used is remarkably deceptive. For instance, a UK representative is reported to have said, “If we’re to deliver an improved tax system through the UN community, there must be the broadest possible buy-in from the start”. Regrettably, that edict did not apply to the OECD’s rules and standards, which its members developed by themselves and which they now pressure developing nations to accept.

The pursuit of a fair, just, and equitable international tax system is paramount. This system should reflect the needs, priorities, and capacities of all countries, considering the unique challenges faced by regions like Africa, the Caribbean, and the Pacific.

Hopefully, this time – the countries of the global south, including the Caribbean, will not sacrifice their long-term interest for short term crumbs. The OECD of 38 nations should not dictate terms for the other 142 states in the world community. That undertaking should rightly reside in the UN.

(The writer is Antigua and Barbuda’s Ambassador to the United States and the Organization of American States. The views expressed are entirely his own. Responses and previous commentaries: www.sirronaldsanders.com)

Comments

Porcupine 2 months, 4 weeks ago

Mr. Sanders, You know as well as anyone who controls this world. The financial interests of the most powerful will always come first. When there is no moral code for those at the top, who will stand against them? Who will live long enough to instigate the needed change? Who absolutely controls the nations leaders, by controlling their economies. I appreciate your advocacy, however.......................

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