International fiscal justice and the reform of the international taxation regime

Fiscal justice¹ is a structural precondition for the realization of a democratic and equitable international order. It is anchored in three normative pillars: the right to development;² the obligation of international cooperation for human rights realization;³ and the principle of sovereign equality,⁴ all of which are directly violated or eroded by the present fiscal architecture. The report first demonstrates that fiscal injustice is democracy-corrosive at both the domestic and international levels, then argues that a United Nations framework convention on international tax cooperation⁵ represents a historically corrective instrument that is superior in legitimacy, universality, efficiency and normative content to the Organisation for Economic Co-operation and Development (OECD)-led alternative.

1. “Fiscal justice’ as a broader term is used here instead of “tax justice”. ↩
2. See General Assembly resolution 41/128. ↩
3. See International Covenant on Economic, Social and Cultural Rights, art. 2 (1); Charter of the United Nations, Arts. 55–56. ↩
4. Charter, Art. 2 (1). ↩
5. See General Assembly in its resolution 78/230. ↩

Several special procedure mandate holders, notably the Special Rapporteur on human rights and extreme poverty (Magdalena Sepúlveda Carmona, Philip Alston and Olivier de Schutter) and the Independent Expert on foreign debt (Juan Pablo Bohoslavsky and Attiya Waris) have shifted the discourse from treating taxation as a purely technical economic policy to a core human rights imperative.⁶ The normative foundational principle for that is the “maximum available resources” doctrine, based on article 2 (1) of the International Covenant on Economic, Social and Cultural Rights, which mandates that States must mobilize and prioritize resources for the progressive realization of economic, social and cultural rights.⁷ Taxation is the primary and most sustainable source of funding for public services like health and education. Hence, failing to address large-scale tax inequalities, even more tax evasion or corporate tax avoidance can constitute a human rights violation, as it reduces the resources available for social services and implementation of social rights.

6. See especially, A/HRC/26/28 (Sepúlveda); and A/HRC/55/54 (Waris). ↩
7. Committee on Economic, Social and Cultural Rights, general comment No. 24 (2017). See also the more recent E/C.12/2025/1. ↩

The United Nations experts argue that tax systems must be progressive and scrutinized for their “spillover” effects on the vulnerable and those suffering from structural discrimination, to mitigate the “uncontrolled growth of the wealth of a few” and prevent the concentration of inequality.⁸ The “fiscal contract” between taxpayers and the State underpins democratic legitimacy not only substantively but also procedurally. In order to be legitimate, it must be transparent and ensure public oversight regarding revenue collection and spending.

8. See A/77/169; A/HRC/55/54; and A/HRC/26/28. ↩

The United Nations experts also underscore the inequities of the present international tax governance architecture, including the maintenance of tax havens, preferential regimes and cross-border tax abuse or bilateral treaty networks that deprive source countries of taxing rights and, more generally, of resources for sustainable development.⁹ Each year, poorer nations transfer more than 1% of world gross domestic product (GDP) to richer ones through debt service, profit repatriation and financial flows, approximately three times more than development aid flowing in the opposite direction.¹⁰

9. See A/HRC/26/28; A/HRC/31/61; A/HRC/58/51; and A/77/169. ↩
10. Ricardo Gómez-Carrera and others, World Inequality Report 2026 (World Inequality Lab, 2026). ↩

The global economy has experienced a structural drift towards the rise of inequalities and capital concentration since the 1980s, the period Piketty identifies as the reversal of the post-war compression era.¹¹ The inflection point of the 1980s was not the product of globalization’s inevitability, but the construct of neoliberal architectural choices both in the international and the domestic fiscal and economic regimes, which have degraded labour relations and dismantled the redistributive mechanisms of the welfare state. Indicatively:
(a) Labour market deregulation and accentuated flexibility, in tandem with a decline in trade union rate and worsening of prevalent collective bargaining legislation, has reduced the bargaining power of middle- and lower-income workers, leading to lower minimum wages relative to the median wage. According to a report of the International Monetary Fund (IMF), a decline in trade union membership (union rate) and the resulting easing of labour markets measured by an increase in labour market is associated with rising inequality.¹² Moreover, the rapidly increasing gap between the rise in productivity and wages¹³ has had a cumulative effect on workers’ share of national income, which fell dramatically after 2000;¹⁴
(b) A huge decline in the progressivity of taxation has undermined the funding of the welfare state and widened inequalities, through cuts in social transfers such as welfare assistance or public retirement benefits. According to OECD, the top marginal tax rates, which were over 80% in 1960, have fallen from 59% in 1980 to 30% in 2009. The average rate of corporation tax has been cut from a nominal 34% in 1995 to 22% in 2017.¹⁵ The corporate tax rates fell from a GDP-weighted global average of 46.67% in 1980 to 26.30% in 2019, with the associated fiscal burden shifting to wages, consumption and small enterprise, a structural shift that erodes both the redistributive capacity of the State and the social contract that legitimates democratic governance.¹⁶ The deterioration in the provision of public goods that boosted productivity and growth in the past is also associated with the massive privatization of important social services.

11. Thomas Piketty, Capital in the Twenty-First Century (Harvard University Press, 2014); and Thomas Piketty, Capital and Ideology (Harvard University Press, 2020). ↩
12. Era Dabla-Norris and others, “Causes and consequences of income inequality: a global perspective”, International Monetary Fund, June 2015. ↩
13. International Labour Organization (ILO), Global Wage Report 2016–2017: Wage Inequality in the Workplace (Geneva, 2016). ↩
14. ILO and Organisation for Economic Co-operation and Development (OECD), “The labour share in G20 economies”, report prepared for the G20 Employment Working Group, Antalya, Turkey, February 2015. See also, www.oecd.org/g20/topics/employment-and-social-policy/The-Labour-Share-in-G20-Economies.pdf. ↩
15. Dabla-Norris and others, “Causes and consequences of income inequality”. ↩
16. George Katrougalos, “Fighting fiscal injustice: the work of the OECD on taxation of digital economy”, Council of Europe, 30 March 2021. ↩

As a consequence, recent data on the state of inequality reveals that 83% of all countries, accounting for 90% of the world’s population, meet the World Bank’s definition of “high inequality”. Wealth inequality is far higher than income inequality. Globally, between 2000 and 2024, the richest 1% captured 41% of all new wealth, in contrast to just 1% being captured by the bottom half of humanity.¹⁷ The richest 10% of the global population own close to three quarters of all wealth, while the poorest half hold barely 2%. Fewer than 60,000 multimillionaires now control three times more wealth than half of humanity combined. Within most countries, the bottom 50% rarely possess more than 5% of national wealth and one in four people globally (2.3 billion) face moderate or severe food insecurity, i.e., having to regularly skip meals, which is up by 335 million since 2019.¹⁸

17. G20 Extraordinary Committee of Independent Experts on Global Inequality, Global Inequality Report 2025 (2026). See https://mcusercontent.com/6cc9fb75dc195fe5dd210c8a4/files/ f0af2240-181a-3d23-5445-3fefaa8b5a02/Full_Global_Inequality_Report_embargoed_pdf. ↩
18. Gómez-Carrera and others, World Inequality Report 2026. ↩

By some estimates, the wealth concentration now exceeds even the apex of the nineteenth century.¹⁹ Inequality feeds back into political capture, regulatory arbitrage and the further entrenchment of fiscal privilege, creating a vicious cycle that erodes democracy.²⁰ Countries with high inequality are seven times more likely to experience democratic decline than more equal countries.²¹ Fiscal injustice hollows out the material preconditions of democracy. The progressive shift of tax burdens from capital to labour is the mechanism through which wealth concentration translates into democratic disenfranchisement, weakening the State’s capacity to fulfil its human rights obligations precisely as it concentrates resources among those with the greatest capacity to capture political processes.

19. Gabriel Zucman, “Global wealth inequality”, NBER Working Paper, No. 25462 (2019). Zucman estimates that today the top 0.0001% of wealth-holders in the United States of America (approximately 19 households) control wealth equivalent to 10–12% of its national income, a concentration factor of almost 40 times what it was in the early 1980s, exceeding, by this measure, even the original Gilded Age, where the equivalent figure was 4%. See Paul Krugman, “Talking with Gabriel Zucman”, Substack, 24 January 2026. ↩
20. See Joseph Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers our Future (W.W. Norton, 2012). ↩
21. Global Inequality Report 2025. ↩

This “race to the bottom” regarding corporate tax rates and illicit flows represents a systemic transfer of fiscal capacity from labour-intense, resource-rich source countries (predominantly in the Global South) to capital-exporting residence jurisdictions (predominantly in the Global North). The role of financial architecture and international fiscal regulation is a pivotal factor for the perpetuation of inequality. Global offshore wealth estimates are at approximately $7.6 trillion to $8 trillion, or roughly 10.4% of global GDP.²² Close to 40% of multinational profits are shifted to tax havens annually,²³ and countries lose over $427 billion annually to international corporate tax abuse and private evasion.²⁴ The Sustainable Development Goals financing gap quantifies the human cost of this dynamic: low- and middle-income countries face a Sustainable Development Goal financing gap of $3.9 trillion (a 56% increase from 2019), with a projected 575 million people still in extreme poverty by 2030.²⁵

22. Gabriel Zucman, The Hidden Wealth of Nations: The Scourge of Tax Havens (University of Chicago Press, 2015); and European Commission, Estimating International Tax Evasion by Individuals, Taxation Papers, No. 76 (2019). ↩
23. Thomas R. Tørsløv, Ludvig, S. Wier and Gabriel Zucman, “The missing profits of nations”, NBER Working Paper, No. 24701 (2018). ↩
24. Tax Justice Network and others, The State of Tax Justice 2020: Tax Justice in the Time of COVID-19 (2020). ↩
25. George Katrougalos, “Globalization in times of crises and war: the role of the OECD since the Russian Federation's aggression against Ukraine”, Council of Europe, 22 November 2023, para. 2.6. ↩

By 2023, the OECD had created at least five putative global tax bodies: the Inclusive Framework on Base Erosion and Profit Shifting; the Global Forum on Transparency and Exchange of Information for Tax Purposes; the Global Forum on Value Added Tax; the Forum on Tax Administration; and the Inclusive Forum on Carbon Mitigation Approaches. The Independent Expert, in his capacity as OECD rapporteur at the Parliamentary Assembly of the Council of Europe, has followed closely the negotiations for the Inclusive Framework. As expected, emerging and developing countries consistently preferred a “broader approach” to digital taxation that was systematically overridden by the dominant members’ agenda. The expansion of OECD membership has operated as a vector for the export of its tax standards: accession negotiations require candidate countries to conform to the “arm’s-length principle”, the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, and model tax treaty standards that restrict source taxation.

The objectives of the Inclusive Framework at its moment of peak ambition promised an improvement of the international taxation system. The Inclusive Framework brought together 136 jurisdictions that, on 8 October 2021, agreed to the so-called “two-pillar solution” (notably, four developing countries – Kenya, Nigeria, Pakistan and Sri Lanka – formally withheld their agreement). Pillar 1, focused on the reallocation of taxing rights, specifically targeting the largest multinational enterprises to ensure they pay taxes where their users and customers are located, rather than solely where they have a physical presence. This would be especially important for digital companies. The pillar 2 global minimum tax, finalized in December 2021, represented the first multilateral attempt to set a floor on corporate tax competition, albeit a rather modest one. By 2023, over 40 countries had legislated or were implementing the reform, with an estimated 90% of large transnational corporations with revenue above €750 million expected to be subject to the minimum tax by 2025.²⁶

26. Ibid., para. 4.3. ↩

However, even these minimal tax agreements were hollowed out before they were implemented. On 20 January 2025, the day-1 executive orders of United States of America President Trump made clear that pillar 2, on a global minimum tax, would have no force for the United States. In early 2026, under threats of domestic tax retaliation, United States finalized a landmark “side-by-side” agreement, under which the OECD framework explicitly exempted United States-headquartered companies from some aspects of the global minimum tax. The practical effect is that United States transnational corporations will continue to have a lower effective rate than the 15% floor. Hence, the agreement entrenches a two-tier system even among developed economies. Essentially, the global minimum tax has evolved into a framework that locks developing countries out of profit-based tax incentives while preserving industrial subsidy capacity for States wealthy enough to finance it.

The two-pillar solution, even under the initial agreement reached during the previous United States presidency, had not produced a level field for developing countries. The genealogy of pillar 2 can be traced directly to the United States Tax Cuts and Jobs Act of 2017, which introduced provisions on global intangible low-taxed income and on base-eroding anti-abuse tax. The United States then multilateralized these domestic provisions through the OECD Inclusive Framework, transforming a unilateral American industrial policy instrument into an international standard described by one commentator as a “made in America tax plan”.²⁷

27. Abdul Muheet Chowdhary, “OECD two pillar solution: designed to prevent the offshoring of high tech production to the global south”, South Centre Tax Cooperation Policy Brief, No. 41, 27 February 2026. ↩

Even fully implemented as drafted, the two-pillar solution would serve two strategic objectives of developed countries and especially the United States: first, to prevent transnational corporations in frontier technologies – such as clean energy, computing and semiconductors – from offshoring production to developing countries by neutralizing their tax incentives; and second, to minimize the taxable profits of transnational corporations of the Global North in market jurisdictions in the Global South. The global minimum tax applies only to profits declared within a jurisdiction, meaning that a multinational enterprise that shifts profits out of a country continues to pay nothing under that tax. The real impact of pillar 2 would not prevent profit-shifting but rather neutralize developing countries’ tax incentives as instruments of industrial competition. According to OECD data, only 2.4% of profits taxable under the global minimum tax are located in lower-middle income countries, and only 0.2% in low-income countries. By contrast, 80% of taxable profits are located in what the OECD euphemistically designates “investment hubs”, a euphemism for tax havens.²⁸

28. Felix Hugger, Ana Cinta González Cabral and Pierce O’Reilly, Effective Tax Rates of MNEs: New Evidence on Global Low-Taxed Profit, OECD Taxation Working Papers, No. 67 (2023). ↩

Moreover, the pillar 1 “amount A” was presented as the mechanism for taxing digital multinationals in market jurisdictions regardless of physical presence, allocating 25% of residual profits (above 10% of revenues) to market jurisdictions. However, it has been combined with a conditionality requiring developing countries to withdraw their digital services taxes as a precondition for participation in it. In practice, it often offered developing countries revenues substantially inferior to the unilateral alternatives they were pressured to forgo. The South Centre, in joint research with the West African Tax Administration Forum and the African Tax Administration Forum, produced country-level estimates for 85 member States demonstrating that those States could expect between €20 billion and €34 billion from a 5% digital service tax, the most commonly applied approach to taxing digital services, compared with only €7 billion to €10 billion from “amount A”, a ratio of roughly 3:1 to 4:1 in favour of the unilateral approach.²⁹ Another study found that “amount A” could actually reduce the taxing rights of certain developing countries – India, Jamaica and Viet Nam faced estimated losses of €89 million, €97 million and €7.4 million, respectively.³⁰

29. Vladimir Starkov and Alexis Jin, “A toss up? Comparing tax revenues from the amount A and digital service tax regimes for developing countries”, South Centre Research Paper, No. 199, 10 June 2024. ↩
30. Mona Barake and Elvin Le Pouhaër, “Tax revenue from pillar one amount A: country-by-country estimates”, International Tax and Public Finance, vol. 32 (2025). ↩

“Amount B”– presented as a simplified approach for baseline marketing and distribution activities in developing countries – has proved similarly problematic. The South Centre’s empirical assessment found that its pricing matrix generates “unjustifiably low taxable profits in developing countries” and risks classifying potentially high-value activities as low-value activities.³¹

31. Chetan Rao and others, “Determining the upper bound of the scoping criteria for amount B in the OECD/G20 two-pillar solution: a policy guide for developing jurisdictions”, South Centre Tax Cooperation Policy Brief, No. 39, 20 November 2024. ↩

Beyond the substantive shortcomings of the two-pillar solution, the Inclusive Framework process suffers from a serious procedural deficit. The formulation of international tax standards now exceeding 1,000 pages has been “shrouded in highly obscure technical jargon”, a “technocratization”, which is a structural product of its institutional design.³² The OECD standard-setting process operates through expert working parties that are formally closed to civil society, developing-country tax administrations and parliamentary oversight. The influence of the major accounting and law firms – whose primary clients are the very multinational enterprises whose tax positions the rules are designed to constrain – creates a structural pressure that no subsequent “public consultation” process is capable of neutralizing. This asymmetry of informational power mirrors, at the international level, the domestic-law capture dynamic analysed in section II above. As Joseph Stiglitz has demonstrated, regulatory capture is most effective precisely in domains of high technical complexity, where the information deficit between industry and regulator is largest and public scrutiny weakest.

32. Sol Picciotto, “The design of a UN framework convention on international tax cooperation”, South Centre Tax Cooperation Policy Brief, No. 38, 15 May 2024. ↩

The absence of democratic accountability is compounded by the absence of parliamentary ratification. The Inclusive Framework standards, despite their binding effects on domestic fiscal systems, are not treaties in the formal sense and do not require legislative approval in most jurisdictions. They are implemented through administrative guidance, executive action and bilateral treaty modifications, a channel that often bypasses both national parliaments and international parliamentary assemblies. The Council of Europe’s Parliamentary Assembly and the European Parliament have both criticized this “democratic deficit” in the context of international standard-setting, but without effective remediation mechanisms. However, more fundamentally, despite its recent expansion, OECD remains essentially a club of the developed countries.

The “Inclusive Framework” rhetoric requires further critical examination. The figure of 145 jurisdictions, frequently cited as evidence of its universality, conceals a structural asymmetry: developing countries were invited to implement rules they did not design, with their admission predicated on implementing the “four minimum standards” of the Inclusive Framework actions (action 5, on harmful tax practices; action 6, on treaty shopping; action 13, on country-by-country reporting; and action 14, on improvements to the mutual agreement procedure). Rather than inclusion, this is more like conditional adhesion, similar to the accession dynamics of other developed country-dominated standard-setting bodies where the price of participation is acceptance of the existing architecture. The comparison with the General Assembly’s standard-setting practice is instructive: Assembly resolution 78/230, by which it mandated the creation of a United Nations framework convention on international tax cooperation, was adopted by 125 votes in favour, with opposition concentrated among precisely those States that dominate the OECD Inclusive Framework.

Its implementation by default privileges the policy preferences and administrative capacities of powerful economies, while de facto constraining the fiscal sovereignty of others. The administrative capacity asymmetry deserves particular attention. The two-pillar solution’s compliance infrastructure – with its global anti-base erosion rules, qualified domestic minimum top-up taxes and subject-to-tax rule requirements – presupposes tax administration capacities that only some OECD Member States possess and that most developing countries lack. This capacity asymmetry is not incidental; it operates as a structural barrier to the effective exercise of taxing rights, functioning in practice as a second-order constraint on fiscal sovereignty that supplements the first-order constraint embedded in the substantive rules themselves.

Thus, the Inclusive Framework process risks institutionalizing a two-tier global tax architecture, with one tier comprising States that have the administrative and political capacity to engage with its complexity and the other tier effectively excluded from meaningful participation, which is incompatible with both the principle of sovereign equality enshrined in Article 2 (1) of the Charter and the right to development recognized in General Assembly resolution 41/128. Of course, the obvious counterargument is that participation in the Inclusive Framework is formally voluntary. However, formal voluntariness combined with structural conditionality (treaty network lock-in, accession conditionality, trade retaliation for digital services taxes) renders “voluntariness” legally fictional. As established in Committee on Economic, Social and Cultural Rights general comment No. 24 (2017) on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, States bear an immediately binding negative obligation to refrain from creating international fiscal arrangements that foreseeably impair other States’ capacity to mobilize maximum available resources. A standard-setting process that structurally disadvantages developing countries’ fiscal capacity is accordingly a human rights violation in the extraterritorial dimension.

In his 2023 report,³³ the Secretary-General characterized the framework convention as “constitutive” in nature, establishing “an overall system of international tax governance” by outlining “the core tenets of future international tax cooperation, including the objectives, key principles for the cooperation and the governance structure of the cooperation framework”. It could really become “the constitution for a global tax body”.³⁴ This constitutional character distinguishes the framework convention from the OECD Inclusive Framework in a fundamental way, in that it will be a formally binding multilateral agreement creating obligations between States at the level of public international law, not a club-produced standard implemented through informal peer pressure and accession conditionality.

33. See A/78/235, para. 55. ↩
34. Sol Picciotto, “The design of a UN framework”. ↩

Ideally, the framework convention should be modelled on the architecture of the United Nations Framework Convention on Climate Change: universal in membership with a clear formulation of binding objectives and a clear normative framework, differentiated in specific protocol obligations and structured to prevent a minority of powerful States from diluting its substantive content to preserve the status quo. Substantive regulatory regimes governing specific issues, such as digital taxation, wealth taxation, mutual assistance and country-by-country reporting, could be adopted as protocols under the umbrella of the framework convention, allowing for differentiated implementation while maintaining the universal normative architecture. The Secretary-General notes that, while tax sovereignty implies the right not to participate in a given process, “the reluctance of some should not be allowed to create obstacles to progress” and that “the content of the framework convention should not be diluted to satisfy a minority of countries” that resist the principles essential for effective cooperation.

A critical political objection to the framework convention, voiced by several developed countries in the Second Committee of the General Assembly, is the risk of duplicating existing arrangements. However, the current international tax architecture is already institutionally fragmented and duplicative, due largely to the drive by the United States and several other major countries to dominate international tax standard-setting. The solution is not to preserve the existing fragmentation but to rationalize it under a universal framework. Practically, this means that: (a) the Convention on Mutual Administrative Assistance in Tax Matters (now ratified by 152 jurisdictions) could be absorbed as a protocol under the framework convention, with modifications as necessary; (b) the fast-track instrument to provide for the streamlined amendment of bilateral double taxation treaties could serve as an additional protocol to streamline adoption of key United Nations model provisions into existing bilateral treaties; and (c) the OECD secretariat could continue to administer legacy implementation of the Inclusive Framework for those States that have adopted it, while the framework convention develops fresh approaches to corporate and digital taxation.

The normative case for the framework convention’s superiority over the OECD framework rests on the following four converging pillars:
(a) Sovereign equality and universal participation. Unlike the OECD process, the framework convention is premised on the right to participate “by right and without preconditions” in agenda-setting and decision-making;
(b) The right to development and common but differentiated responsibilities. The framework convention can institutionalize common but differentiated responsibilities in a fiscal context, allowing developing countries to retain asymmetric taxing rights consistent with their development imperatives, thus operationalizing resolution 41/128 and the Addis Ababa Action Agenda (paras. 23–25) within a legally binding instrument;
(c) Human rights centrality. Unlike the OECD Model Convention, a United Nations instrument can formally incorporate the extraterritorial obligations framework laid out in general comment No. 24 (2017), making harmful tax practices cognizable as human rights violations, and anchor the framework convention’s objectives in article 28 of the Universal Declaration of Human Rights (the right to a just international order) and article 2 (1) of the Covenant (the obligation to deploy the maximum available resources for the realization of the rights therein). Integrating human rights should not be “instrumentalized” against developing countries, as happened with the conditionalities of international financial organizations;
(d) Democratic legitimacy and de-technocratization. A universal intergovernmental convention ratified through domestic constitutional processes carries democratic legitimacy that a club-produced standard cannot replicate.

The framework convention creates the institutional space for a fundamental paradigm shift towards the unitary taxation of transnational corporations, or, at least, towards a fairer allocation of taxing rights. The Group of 24 developing countries, in their 2019 proposal within the OECD Inclusive Framework, argued that such corporations should be taxed as unitary enterprises, with their global profits apportioned among jurisdictions using fractional apportionment. The “significant economic presence” nexus combined with fractional apportionment was precisely what developing countries proposed within the Inclusive Framework process and what the dominant members of OECD consistently resisted but eventually accepted. The pillar 1 “amount A” paradoxically validated the principle while retreating from its implications: it accepted in theory that profits should be taxed “where economic activities occur,” but in practice allocated only 25% of residual profits of approximately 100 companies to market jurisdictions, retaining the fundamentally flawed arm’s-length principle for all other purposes and greatly increasing systemic complexity.

The fundamental mismatch between revenue generation and taxable presence in the digital economy constitutes the central structural anomaly confronting the international tax system. Traditional international tax law rests on the “permanent establishment” nexus doctrine developed in the 1920s, a framework designed to prevent double taxation between physically present companies and their home States. This doctrine was not designed for companies that generate profits remotely at scale through platform economies, user data, network effects and intellectual property lodged in secrecy jurisdictions. The effective tax rates of the largest United States digital multinationals are a fraction of nominal statutory rates.³⁵

35. “Spiral”, in The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, Emmanuel Saez and Gabriel Zucman (W.W. Norton, 2019). ↩

The introduction by the Committee of Experts on International Cooperation in Tax Matters of article 12 B into the United Nations Model Double Taxation Convention between Developed and Developing Countries represents the most practically significant multilateral advance in digital taxation available to developing countries. Unlike the formulaic residual-profit allocation under pillar 1 – applicable only to a handful of the largest transnational corporations, dependent on complex transfer pricing rules and conditioned on the withdrawal of digital services taxes – article 12 B provides source-country Governments with a straightforward, self-executory withholding tax right over income from automated digital services that does not require the multinational enterprise to have a physical establishment in the source country.

A United Nations tax convention with binding provisions on digital taxation could universalize and strengthen the article 12 B approach, establishing: (a) mandatory minimum nexus standards based on significant economic presence rather than physical establishment; (b) source-country taxing rights over user-generated value and advertising revenue derived from market jurisdictions; (c) transparency obligations on platform data and digital services revenues; and (d) the explicit protection of developing countries’ right to maintain unilateral digital services tax measures until a multilateral substitute is in full effect. Developing countries’ championing of article 12 B, and its adoption by the United Republic of Tanzania, provide direct evidence of developing country agency in shaping the United Nations model as a more equitable alternative to the OECD framework and a concrete model that the framework convention could universalize.

While negotiations proceed on the framework convention, developing countries face an immediate practical question: how to exercise source-country taxing rights over digital multinationals against possible reprisals from the United States³⁶ and an existing bilateral treaty network that, where based on the OECD Model, largely denies such rights through the permanent establishment nexus. One possible legally grounded interim solution operating entirely within the existing treaty framework could be the recent proposal for a “domestic law solution”.³⁷ Under article 3 (2) of the United Nations Model Convention – which adopts an ambulatory approach, applying the domestic law definition prevailing at the time of the treaty’s application – a source country can amend its domestic law to define “profits of an enterprise” to exclude consideration for digital services so as to use article 21 (3) (“Other income”) for a treaty-based taxing right over that income.

36. It is noteworthy that, at the end of 2020, when Austria, France, Italy, Spain and the United Kingdom of Great Britain and Northern Ireland had all announced plans to levy digital services taxes, the United States has threatened retaliatory tariffs. ↩
37. Radhakishan Rawal, “Taxation of digital services: a domestic law solution for overcoming tax treaty barriers”, South Centre SouthViews, No. 305, 23 February 2026. ↩

The systemic failures of the international fiscal architecture are compounded by structural opacity. The following accountability mechanisms must be prioritized by a reformed framework:
(a) Public country-by-country reporting. Action 13 of the OECD Inclusive Framework established confidential country-by-country reporting, accessible to tax administrations, predominantly those of developed countries, for reasons of institutional capacity, as the international standard. This falls short of what a human-rights accountability framework demands. European Union directive 2021/2101 on public country-by-country reporting for large transnational corporations, the first mandatory public country-by-country reporting regime, represents a more appropriate model for universalization. Public country-by-country reporting is a direct requirement of the extraterritorial obligations framework established in general comment No. 24 (2017): States cannot fulfil their obligations of international cooperation in fiscal matters without the transparency necessary to assess the tax conduct of such corporations operating across their borders. The framework convention should mandate public country-by-country reporting as a baseline obligation for all Parties;
(b) Beneficial ownership registries. The Tax Justice Network estimates that corporate tax abuse costs Governments approximately $500 billion annually, with a further $182 billion lost to offshore wealth evasion by private individuals, losses that disproportionately affect developing countries, which lose a higher share of public revenues relative to GDP.³⁸ These flows depend systematically on the concealment of beneficial ownership through complex corporate structures and secrecy jurisdictions. Mandatory public beneficial ownership registries, consistent with the guidance of the Financial Action Task Force³⁹ and the Global Forum’s peer review framework, are a necessary condition for effective fiscal justice. The framework convention should establish binding standards for public beneficial ownership disclosure. Corporate assertions of a “right to privacy”– frequently invoked by multinational enterprises within the European Union to challenge these registries – lack sound legal merit. While privacy is a fundamental human right of the private sphere, it does not extend to shielding corporate economic transactions from necessary public scrutiny;
(c) Human rights monitoring role. The Committee on Economic, Social and Cultural Rights and the special procedures system have an underutilized role in monitoring the human rights consequences of harmful tax practices. The proposal by the Independent Expert on foreign debt to link illicit financial flows to human rights obligations⁴⁰ should be adopted and systematically extended. The Committee should incorporate extraterritorial tax conduct as a standard element of its periodic review process, special procedure mandate holders should develop coordinated approaches to fiscal justice monitoring and the framework convention should include a provision explicitly recognizing the role of human rights bodies in its accountability architecture;
(d) Wealth taxation. The “Zucman proposal” for a 2% minimum annual tax on net wealth above $1 billion – developed for the Brazilian presidency of the Group of 20⁴¹ – would generate approximately $250 billion annually from approximately 3,000 individuals.⁴² This connects the structural inequality argument presented in section II above directly to a concrete, multilaterally actionable reform instrument that the framework convention’s governance architecture is uniquely positioned to institutionalize.

38. Tax Justice Network and others, The State of Tax Justice 2021 (2021). ↩
39. See www.fatf-gafi.org/en/publications/Fatfrecommendations/Guidance-Beneficial-Ownership-Legal-Persons.html. ↩
40. See A/HRC/31/61. ↩
41. See https://taxobservatory.world//www-site/uploads/2024/06/report-g20.pdf. ↩
42. Another proposal in the same vein by Thomas Piketty would raise, according to him, 800 billion Euros in a decade just for France. See Thomas Piketty, “A solidarity tax on billionaires could raise €800 billion”, Social Europe, 25 June 2026. ↩

The evidence assembled in the present report leads to the conclusion that the structural deficits of the OECD-led fiscal framework are not contingent imperfections correctable through incremental reform. They are constitutive features of a system whose genealogy, institutional design, procedural architecture and distributional outcomes systematically serve the fiscal interests of developed States at the expense of the sovereign fiscal capacity of the Global South. Far from correcting this asymmetry, the two-pillar solution has deepened it, by neutralizing developing countries’ tax incentives, conditioning their participation on withdrawal of unilateral fiscal instruments and producing revenue allocations demonstrably inferior to the alternatives those countries were pressured to forgo.

The United Nations framework convention on international tax cooperation is both politically preferable and normatively necessary, as a matter of States’ extraterritorial obligations under article 2 (1) of the Covenant, their commitment to sovereign equality under Article 2 (1) of the Charter and their recognition of the right to development under General Assembly resolution 41/128. The political imperative stems from the necessity to mitigate rising inequalities and the power of multinational corporations, both domestically and internationally. The same wealth concentration that the present fiscal architecture enables also captures the domestic political processes that could correct it, as the systematic blocking of wealth tax legislation through oligarchic media control in France and elsewhere illustrates. A multilateral binding instrument operating at the level of public international law, ratified through domestic constitutional processes, is the structural corrective that neither unilateral national legislation nor OECD standard-setting can provide. The United Nations framework convention on international tax cooperation is thus not simply a tax governance reform but a constitutive condition for restoring the democratic legitimacy of international economic order.

The Independent Expert addresses the below recommendations to Member States, the intergovernmental negotiating committee, the United Nations treaty bodies and special procedures, and international financial institutions.

Regarding the framework convention, Member States should provide unqualified political support for the negotiation of a legally binding instrument with universal membership. The convention should incorporate the following, as non-derogable baseline obligations: (a) source-country taxing rights grounded in a significant economic presence nexus; (b) mandatory public country-by-country reporting for all transnational corporations above the relevant revenue threshold; (c) public beneficial ownership registries meeting or exceeding Financial Action Task Force standards; (d) an alternative minimum tax with a tax base of revenue or assets, instead of the global minimum corporate tax rate of the current 15% floor, which the evidence establishes is insufficient to curtail profit-shifting; and (e) the explicit protection of developing countries’ right to maintain unilateral taxes on the digital economy pending an effective alternative at the multilateral level. The convention’s governance should be modelled on the Conference of the Parties framework of the United Nations Framework Convention on Climate Change, ensuring universal participation, civil society access and democratic accountability. No provision should be diluted to accommodate the preferences of a minority of States whose interests are served by the existing architecture.

Regarding unitary taxation as the foundational paradigm, the framework convention should enshrine unitary taxation of transnational corporations, with global profit apportionment based on formulary factors reflecting genuine economic activity (sales, employees, tangible assets) as its foundational approach to corporate taxation, superseding the arm’s-length principle that the Inclusive Framework on Base Erosion and Profit Shifting process has demonstrated to be structurally incapable of eliminating profit-shifting. The Group of 24 fractional apportionment proposal, advanced within the OECD Inclusive Framework and systematically resisted by developed-country members, provides a ready normative and technical foundation for this shift.

Regarding digital taxation, the framework convention should universalize and strengthen the article 12 B approach of the United Nations Model Double Taxation Convention between Developed and Developing Countries, establishing binding source-country withholding tax rights over automated digital services income that does not depend on physical establishment. Pending the convention’s entry into force, developing countries should be actively supported – technically and diplomatically – in deploying all available interim instruments, including unilateral digital services taxes and the domestic law interpretation approach available under articles 3 (2) and 21 (3) of the United Nations Model Convention. The convention should include provisions that practically ensure that developing countries can successfully resist and collectively respond to bilateral trade pressure, tariff threats or diplomatic coercion to withdraw unilateral fiscal measures as a condition of participation in multilateral processes whose demonstrable distributional outcomes are inferior to those measures.

Regarding wealth taxation, the framework convention should include an explicit provision mandating that States Parties give serious consideration to, and actively cooperate in the development of, coordinated wealth taxation instruments consistent with a 2% annual minimum tax on net wealth above $1 billion. A dedicated subsidiary body on wealth and property taxation should be established within the framework convention’s governance architecture. A United Nations-mandated global asset registry – pooling the existing Common Reporting Standard, the Foreign Account Tax Compliance Act and Inclusive Framework transparency data under the joint stewardship of the Department of Economic and Social Affairs, IMF and regional tax administration – should be established to provide the informational infrastructure for both corporate and wealth tax coordination.

Regarding the relationship between the OECD and United Nations frameworks, OECD Member States must acknowledge that the evidence now establishes the structural limits of the Inclusive Framework process and must actively support the subordination of the Inclusive Framework’s ongoing work to the framework convention process rather than positioning it as a competing standard-setting track. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters should be absorbed as a protocol under the framework convention umbrella, rationalizing the institutionally fragmented architecture that OECD self-expansion has produced. The OECD secretariat may continue to administer legacy implementation of the Inclusive Framework for States that have adopted it, but should do so as a technical service provider under the convention’s universal governance framework, not as an autonomous standard-setter.

Regarding human rights integration and monitoring, the Committee on Economic, Social and Cultural Rights should systematically incorporate the extraterritorial tax conduct of States as a standard element of its periodic review process, assessing compliance with the maximum available resources obligation under article 2 (1) of the Covenant in the light of the standards established in general comment No. 24 (2017). The special procedures system should develop a formally coordinated approach to fiscal justice monitoring, building on the complementary mandates of the Special Rapporteur on extreme poverty and human rights, the Independent Expert on foreign debt, other international financial obligations and human rights, and the present mandate, on a democratic and equitable international order. The framework convention should include an explicit provision recognizing the monitoring role of United Nations human rights bodies in its accountability architecture and establishing a formal reporting channel between the convention’s secretariat and the Committee on Economic, Social and Cultural Rights. International financial institutions, in particular IMF and the World Bank, should align their conditionality frameworks and technical assistance programmes with the convention’s normative architecture and cease advising developing countries to adopt tax incentive regimes or bilateral tax treaties that impair their fiscal sovereignty.