G77 must amplify fight for tax justice

When Uganda hosted the G77 and China summit/South to South Summit earlier this year and assumed chairmanship of the G77, among the things we saw come out strongly from the deliberations was that the current international financial architecture does not work for the global south and the majority of the world. 

As UN Secretary General Antonio Guterres noted these institutions, “must be reformed so that they are truly universal…and are much more responsive to the needs of developing countries.” President Museveni noted:

“We also support the urgent reform of the international financial architecture to ensure it is fit for purpose…” 
This reflects a growing dissatisfaction with the system. At the close of last year, the Africa Group successfully pushed for a resolution to establish a UN Framework Convention on International Tax Matters. In a spirited fight, it with the support of the G77,  pushed back against wealthier countries who wanted to maintain the Organisation for Economic Co-operation and Development (OECD) as the decider of global tax norms. 

The Africa group rightfully argued that a handful of countries should not determine tax policy for the world.

The 38 OECD members are all upper middle income or high-income economy as defined by the World Bank.

None are from Africa. Uganda has taken over chairmanship of G77+China at an opportune time and should put international tax reform squarely on the agenda as one of the reforms that can close the gap between the global south and global north and ensure no one is left behind.

Here is why it matters. We live in dark times with a cost of living crisis, geopolitical tensions and wars, uneven recovery from Covid-19 and climate change. Countries, especially low-income ones,  need fiscal space to adequately respond and, tax, if done right, could enable countries to mobilise maximum available resources.

Research by the UN,  the Independent Commission for the Reform of International Corporate Taxation, and even civil society like the Initiative for Social and Economic Rights (ISER),  has found that reforms in international taxation and shifting the determination of global tax norms from the OECD to the UN will better enable developing countries to fund public services like health by curbing tax evasion and ensuring stronger measures to curb Illicit financial flows. Without mobilising sufficient resources through tax, countries are left crippled by high debt that paralyses their spending on social services and other development initiatives for their people.

Reforming the international financial architecture, especially on tax would help with climate financing. Taxation when structured right could finance climate action and also signal to states to take climate action seriously. The $420 million pledged in COP28 to the loss and damage fund is nowhere near the $7 trillion given in fossil fuel subsidies. 

While the resolution for a UN Framework Convention on International Tax Matters passed last year was a historic victory, a lot more needs to be done. At the time, the resolution was passed, the United States of America, European Union, Canada, Israel opposed it, signaling they prefer ineffective tax reforms that benefit their companies rather than our people. There is a risk that there will be further attempts by some countries to derail the process, including in the discussions around what the Terms of Reference for setting up the UN Framework Convention on Tax Cooperation could be. 

We cannot continue to see these tremendous inequalities. Countries who host multinational enterprises and provide markets for their products are not served by existing tax treaty rules which do not reserve sufficient taxing rights for these countries.

The G77+China must come together with a collective voice, and champion reforms during the negotiations around international tax matters that will help our people and enable them to live in dignity.

Allana Kembabazi is a Programs Manager, at Initiative for Social and Economic Rights