African Civil Society Must Advocate for the UN Tax Convention

Given the increased dependence of many African countries on mineral wealth driven by the spiraling demand for critical minerals, a cure for the cancerous corporate tax dodging is urgently required. The adoption of a resolution by the UN calling on the UNGA to begin negotiations for a UN Tax Convention in November 2023 has opened the opportunity for fair and equitable participation of all countries in global tax reform discussions.   The active participation of African countries to align expectations of expanded domestic resource mobilization capabilities with reality now remains a priority.

With heightened demand for critical minerals required to power transition from dirty fuels to clean energy coupled with technological advancement, multi-national corporations’ persistent cancer of tax evasion and tax dodging poses huge risks to Africa’s development aspiration – Agenda 2063 and the UN’s Sustainable Development Goals. The energy transition will also lead to increased exploitation of natural resources which may exacerbate illicit financial flows.

The global tax injustice concerns for corporate tax avoidance were galvanized by the Covid-19 pandemic that hit both developed and developing countries, although the latter was disproportionately affected. Public service delivery particularly health could not cope because of limited domestic resource mobilization caused by massive tax dodging by corporates. Roughly US$483 billion is lost every year to corporate tax abuse according to Tax Justice Network and Public Service International.

Reforming the international financial architecture remains a significant priority in combating illicit financial flows (IFFs) and enhancing domestic resource mobilization. Due to the limited inclusion of African countries in OECD-led tax discussions and the limited relevance of these decisions, African states have long called for a more participatory and fair global tax system. One such platform has also been the Inclusive Framework on Base Erosion Profit Sharing (BEPS) of 2016, signed in Kyoto, Japan.  The Inclusive framework kind of opened more space for African countries unlike in the OECD. Of the 132 countries in the Inclusive Framework are 24 African states compared to 9 countries in the OECD.

Decision-making on the allocation of taxing rights and tax revenue has been controlled by OECD countries over the last 100 years and as such, they have benefited from the status quo. Civil Society Organizations within the tax justice movement have long been advocating for a UN Tax Convention to provide a more democratic space for global discussions and decisions on global tax reforms.

Africa is disproportionately affected by the global financial system that makes it easier for corporates to dodge taxes in countries where they generate substantial wealth by shifting income to tax lower tax jurisdictions that are clouded by financial secrecy. As a result, efforts to fight pandemic poverty and inequality have not received much-needed critical backing of tax revenue from the abundant mineral, oil, and gas wealth. The extractive sector is the crime scene of corporate tax dodging in Africa according to the AU/UNECA’s 2015 High-Level Panel report on Illicit Financial Flows from Africa.

In 2019, the Africa Group at the United Nations called for a UN Convention on Tax and stressed that the group believed such a convention could help to tackle illicit financial flows. In 2020, the proposal of negotiating a UN Tax Convention was also included as part of a UN process. Furthermore, in February 2021, the High-Level Panel on International Financial Accountability, Transparency and Integrity for achieving the 2030 Agenda (the FACTI Panel) also included the proposal for a UN Tax Convention as a key recommendation in its final report. The many suggestions that were received were shot down, and it is in November 2022, that the governments approved a resolution for the UN Tax Convention during the United Nations General Assembly (UNGA).

Civil society both in the Global North and South must join hands just as they pushed for over 20 years to have the need for a UN tax Convention recognized. While this may not be the silver bullet for all the domestic resource mobilization challenges faced by Africa, indeed it can address some of the ills of IFFs and unlock resources to sectors such as;

• Education sector which has continued to lag especially in the face of emergencies such as pandemics and climate disasters. At least cover the huge gap between current education funding to the 20% Dakar Declaration of 2000.
• Health budgets for African governments that continue to grapple to meet the 15% of the national budgets allocated to health (Maputo Declaration of 2003).
• Just transition where Africa’s needs are estimated at over USD 250 billion annually in conditional and unconditional financing between 2020 and 2030 to implement their National Development Commitments under the Paris Climate Agreement.
• Address financial deficits to respond to the humanitarian and human rights challenges that have been caused by conflict, Covid-19 and climate change across Africa.

As Africa puts out its voice for the UN Tax Convention it must call for a principled Convention that puts people and planet at the centre of domestic resource mobilization. The UN Tax Convention must, among other things;

• Have a human face- this means moving beyond financializing the Convention to distilling the principles and intention to transformation of livelihoods through resources from fair and just global tax regime.
• Be more pointed and focused on combatting Illicit Financial Flows.
• Establish a tax treaty that is binding.
• Tackle evils of the race to the bottom.
• Be decisive on aggressive tax planning that leaves no chance for African tax administrators to raise required revenue from Multinational companies.
• Tackle tax havens which have heightened corruption, looting and kleptocracy.
• Offer a robust framework for taxation in the extractives sector, broadening it from minerals to other sectors such as wildlife.