Last week ActionAid went along to a meeting of the UN Tax Committee in Geneva. It might not sound immediately exciting but in the world of taxing corporates across national borders the UN is a critical counterweight to the OECD. And the OECD, as we have blogged before, has developed a dominant body of rules on international tax which are often skewed towards the interests of its 34 developed country members and their big companies.
The most important feature of the UN Tax Committee is that it everyone, in theory, can get a seat at the table: developing countries, emerging economies like Brazil and India, and the wealthy OECD countries. Much of the work it has underway is to adapt and shape international tax rules so that they redress a balance which has swung too much in favour of developed countries.
Last week saw two quiet but important bits of progress. First of all the UN Tax Committee's new Practical Manual on Transfer Pricing for Developing Countries was approved. This unexciting-sounding document provides a critical set of tools for countries to stop the kinds of tax dodging we’ve seen across Africa and Asia with companies like SABMiller. Many big companies have opposed the UN’s rules, instead backing an alternative set of rules – drawn up by the OECD - which makes it much harder for developing countries to stop tax dodging. Just before last week’s meeting the US Council for International Business wrote an indignant letter to the Committee complaining that the manual was too different from the OECD rules. In reality, the manual is hardly a little red book of revolution: it’s linked to the UN Model Convention which itself refers to the OECD guidelines. But the break-away feature of the manual is its appendix which sets out the Brazilian, Chinese, Indian and South African approaches to transfer pricing which have adapted the rules to make them workable in a developing country context.
Secondly, the UN Committee decided to develop a new article for its Model Convention: a model used by countries when negotiating with other countries to divide up the international tax base. The point of the article is to give developing countries the right to tax payments for technical services, management and consultancy fees that are made from companies in developing countries to their overseas relations. These payments were one of the ways that we found that the brewer SABMiller was shrinking its tax bill in Africa and India, shifting profits into tax havens. US and UK delegates at the meeting were quick to deny that developing country tax bases were reduced by the movement of these fees across borders. Nevertheless the proposed work will go forwards with much support from the developing country delegates.
Small steps, but more critical signs that developing countries, with the support of campaigners around the world, are beginning to stand up and insist that international tax rules must be changed to stop giving tax dodgers an easy ride. 2013 is election year for the UN Tax Committee. It is crucial that the Committee has strong representation from developing countries so that it can continue to shape international tax rules based on their experiences. ActionAid will be there promoting the rights of developing countries to push forward the Committee’s work, and make the rules fairer for everyone.