UNGA Resolution on International Tax Cooperation Framework
The United Nations General Assembly has unanimously adopted a resolution to develop an international tax cooperation framework or instrument based on a UN intergovernmental process. Nigeria submitted this resolution on behalf of a consortium of 54 African countries.
Why is this UNGA resolution significant?
The proposed UN framework on global tax cooperation will put an end to the Organisation for Economic Co-operation & Development’s 60-year role as the regulator of taxations across the world. Similar framework has been proposed by the OECD. It has been under development in the OECD for nearly a decade but its final draft is yet to be given. The proposed UN framework will likely put an end to the power struggle between the UN and the OECD on international tax regulations.
The proposed framework is expected to benefit developing countries in Africa and Asia since they are provided with a larger say on the formulation of global tax regulations.
Besides covering tax issues related to digital economy, it is also expected to focus on the problem of illegal money flows and provide solutions for the same. It will have a major impact on global and local economies, businesses and people across the world.
What is the “Two Pillar Solution”?
The “Two Pillar Solution”, which was spearheaded by the OECD, aims to address the tax challenges that are occurring within the digital economy. Pillar One deals with the biggest and most profitable multinational enterprises and reallocates a part of their profit to countries where the they sell their products and services. According to Pillar Two, any company with an annual revenue of over €750 million will be subject to a global minimum corporate tax.
With the Two-Pillar Solution all economies, including developed, developing and emerging economies, will receive additional tax revenues. Pillar One is expected to divert more than 125 billion USD in tax to market jurisdiction each year. Pillar Two is expected to generate some 150 billion in addition global tax revenue each year.
Despite the Two-Pillar Solution’s benefits, the mechanism of allocation of profits has remained an area of contention among several developing countries. The new UN-led tax regime is expected to address these challenges.
Category: International / World Current Affairs
Topics: digital economy • digital tax • OECD • Organisation for Economic Co-operation and Development (OECD) • Two Pillar Solution • United Nations General Assembly • United Nations General Assembly (UNGA)
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