Towards a UN Protocol for Taxing Cross-Border Services in a Digitalized Economy
By Abdul Muheet Chowdhary, Anne Wanyagathi Maina and Kolawole Omole
This Policy Brief offers a way forward on the United Nations Framework Convention on International Tax Cooperation’s (UNFCITC) protocol for taxing cross-border services in a digitalized economy. Such a protocol can provide a way to standardize and harmonize the existing plethora of widely varying Digital Services Taxes (DSTs), which can reduce political tension between the Global North and South, ease compliance costs and uncertainties for business, while providing a basis for the elimination of double taxation. The revenue generated can help bridge the Sustainable Development Goals (SDGs) financing gap and for the realization of human rights in the Global South. The Group of Twenty (G20) can act as a forum where key countries in the North and South can hammer out the architecture of the protocol for taxing cross-border services.
What Is Driving the BRICS’ Debate on De-Dollarisation?
By Ding Yifan
Ahead of the 2023 BRICS summit in Johannesburg, South Africa, there was much discussion amongst the member countries about whether negotiations would take place at the meeting regarding the development of a BRICS currency and the acceleration of de-dollarisation, that is, the promotion of currency cooperation and reduction in the use of the US dollar. In the end, the country leaders did not specifically discuss the issue of a BRICS currency but passed a resolution on expanding the organisation’s membership. Nonetheless, from both historical and realist perspectives, it is in the interest of the BRICS countries to promote de-dollarisation.
General Statement at the 2nd Preparatory Committee for the 4th International Conference on Financing for Development
New York, 3-6 December 2024
At the 2nd Preparatory Committee for the 4th International Conference on Financing for Development, South Centre emphasised the important opportunity FfD4 presents for developing countries to address significant shortfalls in resource mobilization necessary to implement SDGs & to reform the international financial architecture to align with Southern priorities.
South Centre Inputs to FfD4 Elements Paper – Debt Sustainability, Business and Finance, Taxation
By Yuefen Li, Danish, Abdul Muheet Chowdhary
The upcoming 4th conference on financing for development (FfD4) represents an important opportunity for developing countries to achieve a deep reform of the international financial architecture so that it meets their sustainable development needs and enhances the scale of development finance to fully realize the 2030 Agenda for Sustainable Development. Based on the inputs provided by the South Centre to the FfD4 process, this policy brief highlights some of the key messages, problem statements and policy solutions in the areas of sovereign debt, private business and finance, and international tax cooperation that should be considered by the countries of the global South in their deliberations towards achieving ambitious outcomes at FfD4.
Undue High Expectations of the G20 Common Framework: Urgent Need to Reform the International Debt Architecture
By Yuefen Li
This article stresses how international debt architecture reform requires innovative solutions beyond the G20 Common Framework, and should be addressed at the 4th International Conference on Financing for Development.
Determining the Upper Bound of the Scoping Criteria for Amount B in the OECD/G20 Two-Pillar Solution: A Policy Guide for Developing Jurisdictions
By Chetan Rao, Ruchika Sharma, and Dr. Vijit Patel
Amount B, a component of the OECD/G20 Two-Pillar Solution, has been designed to simplify transfer pricing for baseline distribution activities. With the aim of developing a practical policy guide for developing jurisdictions to fine tune the quantitative scoping criterion under Amount B, i.e., “annual operating expense to annual net revenue” ratio, this paper critically analyses various aspects of this criterion. The upper bound of this ratio is purported to help jurisdictions in identifying baseline distributors. It is currently set as a flexible range from 20% to 30%, with the choice available to each adopting jurisdiction deciding the exact point in the range for implementation of Amount B within its jurisdiction. Given the lack of any data-backed rationale in the Amount B report for development of this range, the authors suggest that the upper bound range might have been politically negotiated. For this very reason, developing countries need to tread carefully while setting the upper-bound and consider both its tax as well as policy implications. Through an empirical analysis of independent distributors in India, the paper highlights the link between the upper bound, functionality, and profitability, illustrating how these metrics impact developing countries with lower asset and expense intensities. The findings suggest that setting the upper bound at the higher end of the range could unintentionally bring above-baseline distributors into scope, thus foregoing long-term taxing rights for developing jurisdictions. Through this analysis, the paper offers practical insights and recommendations for jurisdictions, especially developing ones, for setting this upper bound to protect their taxing rights and minimize risks of misclassification of above-baseline distributors as baseline.
Statement by the South Centre at the 2024 Social Forum of the Human Rights Council
31 October 2024
At the Human Rights Council Social Forum, South Centre Senior Programme Officer Abdul Muheet Chowdhary presented key international tax reform inputs to the upcoming Fourth International Conference on Financing for Development (FfD4) for “The Contribution Of Financing For Development To The Advancement Of All Human Rights For All”.
Statement to the 10th Session of the Expert Mechanism on the Right to Development
28 October 2024
The South Centre is participating in the 10th Session of the Expert Mechanism on the Right to Development at UN Geneva, exploring innovative solutions for the full realization of the Right to Development in the Global South.
STATEMENT BY DR. CARLOS CORREA, EXECUTIVE DIRECTOR OF THE SOUTH CENTRE, TO THE MINISTERS AND GOVERNORS MEETING OF THE INTERGOVERNMENTAL GROUP OF TWENTY-FOUR (G-24)
21 October 2024, Washington D.C.
The South Centre participated in the G-24 Annual Meeting of Ministers and Governors in Washington D.C. See our statement:
The Implications of Treaty Restrictions of Taxing Rights on Services, Especially for Developing Countries
By Faith Amaro, Veronica Grondona, Sol Picciotto
Taxation of cross-border services has been identified as a high priority issue in the United Nations (UN) negotiations to establish a new global framework for tax. This paper analyses the defects of international tax rules as applied to services, and their exploitation by multinational enterprises (MNEs), focusing on the impact on developing countries. Services have become increasingly important for economic development, but international tax rules favouring delivery by non-residents act as a disincentive to the growth of local services providers, particularly disadvantaging developing countries which are mainly hosts to MNEs. We analyse the restrictions on source taxation of services in tax treaties, particularly those based on the model of the Organisation of Economic Co-operation and Development (OECD), and show that their spread has been accompanied by a widening deficit in services trade of developing countries, while the weakening of their attempts to protect their tax base through withholding taxes has resulted in increasing losses of tax revenue. The paper combines detailed qualitative analyses of tax treaties with quantitative estimates of their effects on trade and tax revenues for services of five developing countries: Argentina, Brazil, Colombia, Kenya and Nigeria. Our analysis suggests that a new approach is needed for taxation of services, breaking with the residence-source dichotomy, and adopting formulary apportionment. This could be based on the standards agreed in the Two Pillar Solution of the OECD/Group of Twenty (G20) project on base erosion and profit shifting (BEPS) and developed now through the UN.
Analysis of Imbalanced Tax Treaties of Developing Countries
Insights From the Tax Treaties Explorer Database
By Aiwei Feng, Shristi Joshi and Quinn McGannon
This report will start from exploring the historical background, theoretical frameworks, and practical implications of tax treaties, with a specific focus on their impact on developing countries. Utilizing diverse literature and datasets, including the Tax Treaties Explorer (TTE) from the International Centre for Tax and Development, it aims to identify restrictive tax treaties and provisions disadvantageous to developing nations. The methodology involves desk reviews, data analysis, and case studies to offer insights into challenges faced by developing countries in international taxation. By scrutinizing key provisions like those concerning permanent establishment and withholding taxes, it aims to highlight how treaties affect revenue generation, economic sovereignty, and development outcomes of South Centre Member States. South Centre Member States have been chosen for the purpose of this study due to their status as developing countries with much to gain from renegotiating their existing tax treaties.
Ultimately, this study intends to fill the gap in terms of treaty research and development of tax treaties of South Centre Member States by identifying their restrictive tax treaties and provisions therein with Organisation for Economic Co-operation and Development (OECD) countries. The choice of OECD countries reflects their status as mostly developed countries. At the same time, the study also intends to supplement tax treaties literature so far dominated by legal and economic analyses by focusing specifically on identifying specific restrictive provisions.
Statement by the South Centre at the 57th Session of the Human Rights Council on “Realizing the right to development: The case for a United Nations framework convention on international tax cooperation”
September 2024
At the 57th session of the Human Rights Council, South Centre outlined the possible content of protocols to the United Nations Tax Convention for taxing Illicit Financial Flows & Digital Services.
