EXPLORING THE MERITS AND FEASIBILITY OF A NEW INTERNATIONAL CONVENTION ON TAX AND FINANCIAL TRANSPARENCY
Every year, billions of US dollars in government revenue are lost through corporate tax avoidance, profit shifting, and other tax-related illicit financial flows. This is an issue of transboundary concern, undermining States’ fiscal independence and hampering the prospects for achieving the Sustainable Development Goals. At the heart of the matter is the deliberate use, by certain jurisdictions, of low or zero tax-rates and financial secrecy to attract capital and profits.
Considerable progress has been achieved over the past decade, including under the OECD/G20 Inclusive Framework on BEPS. However, ongoing efforts have raised a number of questions regarding the effectiveness and fairness of the rules that have been introduced, as well as the legitimacy and accountability of the way in which these rules have been developed. In response, a growing number of States, civil society actors, and decision-makers have concluded that it is time for a new approach, and that this should take the form of a new international convention on tax and financial transparency. Such a convention would address—in an open, inclusive, and comprehensive manner—tax-related aspects of illicit financial flows.
This report considers the merits and feasibility of such a convention, outlining the conditions for, and key steps in, a diplomatic process towards its adoption. It concludes that a new international convention, if well-conceived and developed, could constitute an achievable and meaningful tool in the international community’s efforts to tackle tax-related illicit financial flows. To get a negotiation process started, however, the proponents of this proposal may need to develop a clearer common understanding of the rationale for a new convention, its role and purpose, and the added value of its substantive content.