By Bodo Ellmers

Creating better institutions for international tax cooperation is considered a key pillar of international financial architecture reform. The first round of negotiations for a comprehensive United Nations (UN) Framework Convention on International Tax Cooperation (FCITC) has just concluded at the UN headquarters in New York City. 

Building on preparations by three working groups, the negotiations lasted for two weeks and dealt with the core Framework Convention, as well as two additional protocols – on taxing cross-border services and on tax disputes. These were the first negotiation sessions in a process that is set to run until 2027, with the next round scheduled for November 2025 in Nairobi. 

Procedural innovations in tax governance

Tax dodging and harmful tax competition are both key reasons why countries struggle to mobilize sufficient domestic resources for financing development and the provision of public goods. The problem is global in nature and requires multilateral solutions, which was the rationale for mandating this UN process leading to a Tax Convention. The newly founded Intergovernmental Negotiating Committee on the FCITC held its First and Second Sessions in one package, from 4-15 August 2025. 

As a UN process, the FCITC negotiations are universal in scope and open to all 193 Member States. They are also designed as a multi-stakeholder process that allows for the formal participation of non-state actors such as civil society organizations (CSOs). The FCITC process thus delivers on requests to have ‘a seat at the table’ when international tax rules are being made – a request that has been expressed most vocally by African Member States and by CSOs in recent years. All sessions have been live-streamed on UN Web TV and are still available as recordings, which significantly increases the standards of transparency and accountability in this segment of global economic governance. At the same time, there is still room for improvement. For example, the CSOs have raised concerns about the fact that, in between the formal negotiating sessions, a high number of intersessional meetings take place online without CSO participation. 

Scoping of Member States’ positions

As the negotiations are set to last several years, the first meetings were more like a scoping exercise. However, they provided interesting insights into the different Member States’ perspectives on the agenda items.

When it comes to the core Convention, the issue of complementarity has, for example, taken up a lot of space in the past. This looks at whether the FCITC should complement or replace existing tax agreements, most of which have been negotiated at the Organisation for Economic Co-operation and Development (OECD). Not surprisingly, some OECD Member States have expressed a preference for the former, while opposing views came from other countries. A recent announcement by the Group of 7 (G7) has, however, changed this dynamic. Specifically, the G7 took the position that US companies should be exempt from the OECD’s so-called minimum effective corporate tax rate of 15 per cent. This has caused renewed concerns about the fairness of the deal, and seems to have cooled the enthusiasm among OECD countries for defending the agreement at the UN. 

It has, for a long time, been clear that different Member States have different appetites when it comes to tying themselves to a multilateral tax framework, but the sessions in New York showed a growing willingness among countries to at least discuss the advantages that such as agreement could bring. There was also a consensus that international tax cooperation should promote sustainable development in all its dimensions. CSO comments also stressed the importance of prioritising a rights-based approach, including human rights. 

In the context of promoting tax justice, taxation of ultra-rich individuals was another item that featured. The need to improve taxation of high net worth individuals (HNWI) has emerged in global governance processes such as the G20 process and the UN’s Financing for Development process recently. This issue is included in the Terms of Reference for the FCITC. Thus, the UN negotiations constitute an avenue for operationalization and implementation. 

Taxation of cross-border services

This topic has gained relevance in recent decades due to the surge in digital services sold by firms from the digital economy – some of which belong to the group of firms with the highest turnover and profits globally, but pay relatively little tax. Because the economic activity of these firms is detached from their physical presence, traditional modes of taxation where the latter is a relevant factor do not work well in this sector. Source-based, gross-basis taxation that allows countries to tax digital services, even without a company’s physical presence in the country where the income is generated, has been promoted as an alternative during the negotiations. 

CSOs – including the Global Alliance for Tax Justice – pushed for a shift away from the broken transfer pricing models that have shaped corporate taxation over the past century, towards unitary taxation. They also demanded more progressive taxation. Existing unilateral digital taxes that already generate substantial revenues, such as France’s digital tax, were also highlighted in the debate.

Shaping global tax dispute settlement rules

Elements that featured in the initial discussions on the protocol touched on several key issues: the scope of the new global rules, and whether they should apply only to cross-border tax disputes or whether they should extend to domestic disputes as well. The most controversial item was perhaps to what extent arbitration should be compulsory or optional. Many countries expressed caution, citing negative experiences with investor–state dispute settlement (ISDS) mechanisms and the role that arbitration bodies had played in these. In some cases, costs to the public purse have been high and private investors have sued governments that have tried to introduce vital regulatory measures, for example, to tackle climate change. UN panels for decision-making have been mentioned as a possible alternative. 

However, stakeholders also mentioned that there is much scope to limit the need for dispute settlements through preventive measures. For example, the complex transfer pricing system that allows firms to shift profits across borders, including to tax havens, is considered a key reason why tax disputes occur in the first place. CSOs also argued that more transparency – for example, the obligation for transnational corporations to report turnover and profits separately for each country (in the form of public country-country reporting) – could also generate more clarity.

The deliberations and negotiations are set to continue at the third sessions of the Committee, which are due to take place in Nairobi, Kenya, from 10-21 November 2025. 
 

For further information on the FCITC process at the United Nations: 

Watch our Global Finance Rewired Podcast with Chenai Mukumba, Executive Director of Tax Justice Network Africa, on the UN Tax Convention.

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Input by GPF Europe partner organizations, in particular by CESR and Eurodad, has been used to draft this blog. Many thanks! The author bears sole responsibility for the final product.