The South Centre is seeking to fill a Researcher position in the South Centre Tax Initiative, the organization’s flagship project for promoting cooperation among developing countries on international tax matters. The Researcher will be required to carry out analysis to support the ongoing negotiations on international taxation in the United Nations and the OECD. The analysis will focus on the implications for developing countries of the various international tax standards under negotiation with a view to providing the South Centre’s Member States and developing countries from the G-77+China with policy advisory and capacity building. The Researcher will also be required to produce revenue estimates of the policy proposals of developing countries and where necessary, a comparison with the proposals of developed countries. The Researcher is expected to have deep knowledge of international taxation, particularly in transfer pricing and a strong background in economics and quantitative economic analysis.
Value Addition or Trade Misinvoicing: Coal Trading in the Asia-Pacific
By Manuel F. Montes and Peter Lunenborg
Statistics on coal trade between India, Singapore and Indonesia suggest that trade misinvoicing is used as a vehicle for illicit financial flows. At present this practice is not well addressed by the Organisation for Economic Co-operation and Development’s tax standards. Asia-Pacific countries should intensify cooperation on this issue. Other international organizations with a mandate in this area could also play a role, for instance the World Trade Organization. Ultimately, increased cooperation would help to achieve Sustainable Development Goal 16.4 which inter alia aims, by 2030, to significantly reduce illicit financial flows.
SOUTH CENTRE-WATAF JOINT SPECIAL TECHNICAL SESSION ON THE OECD TWO PILLAR SOLUTION
(JULY 4-5 2023)
The South Centre and the West African Tax Administration Forum (WATAF) successfully organised a two-day special session in Abuja, Nigeria, from 4-5 July, 2023, aimed at enhancing the understanding of WATAF and South Centre member countries on the draft rules of the OECD Two Pillar solution to taxation of the digitalised economy. The session brought together officials responsible for tax policy, legislation, and administration, along with experts representing African and Latin American countries in the OECD Inclusive Framework Steering Group.
The GloBE Rules: Challenges for Developing Countries and Smart Policy Options to Protect Their Tax Base
By Emmanuel Eze, Sol Picciotto, Muhammad Ashfaq Ahmed, Abdul Muheet Chowdhary, Bob Michel and Tommaso Faccio
The OECD global minimum tax of 15%, known as the Global Anti-Base Erosion (GloBE) Rules, have meant that developing countries need to consider what policy responses to take to ensure they collect the minimum tax and not cede it to developed countries. One option being promoted by the OECD is the “Qualified Domestic Minimum Top Up Tax” (QDMTT), with the claim that it will help developing countries collect the minimum tax of 15%. This Policy Brief points out that under the QDMTT MNEs can still pay zero taxes, it does not guarantee tax collection, it is complex to administer, it curtails national sovereignty in the form of the “peer review” mechanism and it is relevant mainly for tax havens which are destinations of profit shifting. The Brief then outlines policy options relevant for developing countries, namely Alternative Minimum Taxes (AMTs) and reform of tax incentives.
TAXING MULTINATIONALS: THE BEPS PROPOSALS AND ALTERNATIVES
BEPS Monitoring Group, 6 July 2023
This briefing by the BEPS Monitoring Group (BMG) analyses the outcomes of the latest phase of the G20/OECD project on base erosion and profit shifting, and outlines options and alternatives, especially for developing countries. The BMG is a network of experts on various aspects of international tax, set up by a number of civil society organizations which research and campaign for tax justice including the Global Alliance for Tax Justice, Red de Justicia Fiscal de America Latina y el Caribe, Tax Justice Network, Christian Aid, Action Aid, Oxfam, and Tax Research UK. This report has not been approved in advance by these organizations, which do not necessarily accept every detail or specific point made here, but they support the work of the BMG and endorse its general perspectives. It is based on previous reports, and has been drafted by South Centre’s Abdul Muheet Chowdhary, Alex Cobham, Emmanuel Eze, Tommaso Faccio, Jeffery Kadet, Bob Michel, and Sol Picciotto.
Statement by the South Centre on the Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy
28 July 2023
The South Centre takes note of the Outcome Statement by 138 member jurisdictions of the OECD/G20 Inclusive Framework (IF) made on 11 July 2023, on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. In this statement the South Centre highlights the inclusion of rules that have the practical effect of reducing the tax payable to developing countries under Amount A, the limitations of Pillar Two and other key aspects of the OECD proposed rules that require attention by developing countries before they decide to be tied up by such rules.
COVID-19 impacted humanity in many ways and one such impact is wide acceptance of the concept of Work From Home (WFH) by the corporate sector. Previously, WFH did exist in some countries, perhaps at a much smaller scale, but compulsions of COVID-19 have made WFH a new normal. This new normal also creates new tax challenges for the Multinational Enterprises (MNEs). Does the employee create a taxable presence in the countries where they are working remotely through a ”permanent establishment” and if yes what are the profits attributable to such permanent establishment?
The existing treaty provisions are likely to result in widespread litigation on these issues. It is desirable that a new provision is introduced in the tax treaties to tackle these issues. The suggested remote worker permanent establishment provision adopts a very simple measurable threshold for determination of permanent establishment and also attempts to balance taxing rights of the country of source as well as residence. A simple standardised approach could be adopted for determining the profits attributable to such permanent establishment.
South Centre Statement to the Non-Aligned Movement (NAM) Ministerial Meeting
July 5-6, 2023
Baku, Azerbaijan
The South Centre supports developing countries with policy-oriented research, advice on international negotiations and capacity building. Since its inception, the South Centre has maintained a close relationship with NAM. We are strong supporters of its principles, appreciate its achievements, and believe in the central role that NAM can play in reforming the multilateral system.
The South Centre will continue to work with NAM and its member countries to support them in their efforts to shape a fairer multilateral system that is responsive to the needs of the Global South.
Taxation of Digital Services: what hope for the African States?
By ADJEYI Kodzo Senyo, KOUEVI Tsotso and AMAGLO Kokou Essegbe
Globalization makes it necessary to adapt multinational taxation by taking into account the place of use or consumption of goods and services. “Pillar 1” of the OECD aims to allow States in which multinationals market products or services, or collect data and content from users, to benefit from a portion of their residual consolidated worldwide profit. Since residual profit is a function of the turnover and profit achieved in the jurisdiction, this solution can only be an advantage if, beyond the rules of fair taxation, efforts are made to promote the use of digital services. Internet access is one of the levers that can increase the consumption of digital services. The current situation in Africa according to statistics published by the International Telecommunication Union (ITU) shows low rates of internet access compared to other continents.
The United Nations Intergovernmental Process – An Opportunity for a Paradigm Shift
By Kuldeep Sharma and Raunicka Sharma
Efforts are underway to strengthen the inclusiveness and effectiveness of international tax cooperation so that the current tax structures consider the equitable interests of developing countries. This is necessitated as a section of developing countries has lost confidence in the OECD and there is a lingering doubt whether OECD has developing countries’ best and equitable interests in mind. As a result, the United Nations General Assembly has launched intergovernmental talks to enhance international tax cooperation and draft a UN Tax Convention that aims to establish inclusive norms for transparency and tax cooperation, that leads to development of an acceptable and frictionless worldwide tax policy.
UN Model Tax Convention Article 26: Inequitable Exchange of Information Regime – Questionable Efficacy in Asymmetrical Bilateral Settings
By Muhammad Ashfaq Ahmed
The United Nations Model Tax Convention between Developed and Developing Countries (UN MTC) Article 26 charts out an exchange of information (EOI) regime “between developed and developing countries,” feigning that it is more favorable to the latter set of nations. Contrarily, the Organisation for Economic Cooperation and Development (OECD) MTC Article 26 is professedly geared to protect and promote interests of OECD members – “the club of the rich.” Even a cursory comparative look at the two MTCs intriguingly reveals lack of dissimilarities, and irresistibly leads to the conclusion that materially both provisions are identical. The situation gives rise to a paradox whereby developing countries that are completely at different levels of development have broken governance structures, convoluted fiscal and criminal justice systems and struggling tax administrations, have been yoked into a multilayered EOI regime, which stemmed from an intra-OECD statecraft imperative and is pre-dominantly beneficial to developed countries. The new normal contributes towards enhancement and deepening of the embedded inequities in the neocolonial economic order. The paper seminally dissects the strains generated by absence of dissimilarities between the two MTCs vis-à-vis Article 26, and posits that, in fact, this fundamentally being a developed country project, developing countries have been exploited as ‘beasts of burden’ merely to promote economic interests of dominant partners in the relationship, and by doing so, sheds light on and galvanizes the unjustness latent in the international taxes system – an inherently unequal and lopsided affair. It also delves deeper into an axiological normative evaluation of the extant EOI regime, and finding it untenable, urges a larger paradigm shift. In fact, the UN’s meek convergence with the OECD on EOI regime, ditching developing countries and leaving them to fend for themselves in this critical area of international taxation, is the scarlet thread of the paper.
