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17 February 2025 UN intergovernmental negotiating committee on Tax Framework Convention on Tax Cooperation holds organizational session
From 3 to 6 February 2025, the intergovernmental negotiating committee on the United Nations (UN) Framework Convention on International Tax Cooperation held its organizational session. Outcomes of the meeting included the election of the Bureau, which consists of a Chair, 17 Vice-Chairs and a Rapporteur, with representation from various regions. The intergovernmental negotiating committee established a decision-making process that strives for consensus. When consensus cannot be reached, a simple majority vote generally will be sufficient, but a two-thirds majority will be needed on matters of substance relating to a protocol to the Framework Convention. The negotiating committee chose prevention and resolution of tax disputes as the subject for the second early protocol to the Framework Convention. Looking ahead, a detailed roadmap is to be finalized by the end of March, including guidelines for several work streams and the frequency of virtual meetings. In December 2022, the UN General Assembly adopted Resolution 77/244, which called for the beginning of discussions on ways to strengthen the inclusiveness and effectiveness of international tax cooperation through the evaluation of options, including the possibility of developing an international tax cooperation framework. This work culminated in the UN General Assembly's approval of Resolution 78/230 in December 2023, which provided for the establishment of an ad hoc committee for the purpose of drafting Terms of Reference (ToR) for a UN Framework Convention on International Tax Cooperation.1 In June 2024, the ad hoc committee released a "zero draft" for the ToR, seeking feedback from stakeholders and receiving more than 100 submissions.2 A revised ToR was discussed and approved by the ad hoc committee by vote on 16 August 2024 for submission to the UN General Assembly.3 On 24 December 2024, the UN General Assembly adopted Resolution 79/235, which approved the ToR for the development of a UN Framework Convention on International Tax Cooperation. The ToR provides for the establishment of an intergovernmental negotiating committee to draft the Framework Convention, together with two early protocols. The ToR further stipulates that one of the early protocols is to address the taxation of income derived from the provision of cross-border services in an increasingly digitalized and globalized economy, with the subject of the second early protocol to be decided at the organizational session of the intergovernmental negotiating committee from a list of four specific priority areas. The intergovernmental negotiating committee is scheduled to meet three times a year in 2025, 2026 and 2027 and is expected to submit the final text of the Framework Convention and the two early protocols to the General Assembly for consideration in 2027.4 The organizational session of the intergovernmental negotiating committee on the UN Framework Convention on International Tax Cooperation focused on establishing the organizational structure and decision-making processes, along with selecting the topic for the second early protocol of the convention. The negotiating committee emphasized the importance of stakeholder involvement and expressed support for participation from international organizations, and other stakeholders, including the private sector. In this regard, draft decision CRP.2, concerning the participation of stakeholders, as amended by CRP.6, was adopted without a vote. During the initial discussions, jurisdiction delegations expressed different perspectives regarding the process. A statement from Poland, on behalf of the European Union Member States, indicated that "only adoption by consensus guarantees a truly inclusive process as it makes sure the viewpoint of each single negotiating party matters and the different points of view are taken into consideration. Whereas departing from consensus while deciding on the Framework Convention would jeopardise the process. … We remain committed to engaging in good faith negotiations, provided that the process is truly inclusive and reflects the views and interests of all participating Member States." Singapore stated that "Achieving consensus will require more concerted efforts from everyone in this room, because of the widely differing needs, circumstances and priorities of countries. But these differences are precisely why we must make every effort to close areas of divergence, forge compromises and arrive at solutions that garner broad agreement. Only then can aspiration be translated into action." Brazil stated that "The success of this convention will depend on our ability to find common ground. The Chair has a vital role in fostering an environment of open dialogue and mutual understanding. We encourage comprehensive consultations with all delegations to bridge different positions and ensure that all voices are genuinely heard and reflected in our outcomes." The United States expressed opposition to the process: "We do not plan to participate further in this organizational session, process, or negotiating United Nations Framework Convention on International Tax Cooperation text. We reject the very nature of these discussions. The process that has been adopted will lead to a Convention that would unacceptably hamper nations' abilit[ies] to enact tax policies that serve the interests of their citizens, businesses, and workers. Further, within these discussions, we underscore our profound objection to the process thus far. We have repeatedly voted 'no' to express our concerns with the direction and the evolution of the decision-making process away from consensus and have been met only with inflexibility. Finally, we underscore that the United States intends to reject the outcomes of this Framework Convention process and oppose them. We welcome others to join us in opposition." The intergovernmental negotiating committee elected, by acclamation, its Chair, 17 Vice-Chairs and Rapporteur, which comprise the Bureau:
There was extensive discussion regarding how the intergovernmental negotiating committee should make decisions. Many delegations advocated for consensus-based decision-making, emphasizing the need for inclusivity and broad support. Other proposals included majority voting and qualified majority voting. The French delegation, on behalf of four other delegations from Europe, presented an oral amendment on consensus decision-making. However, the proposal was rejected in a recorded vote of 42 in favor, 98 against and 10 abstentions. Ultimately, the intergovernmental negotiating committee decided to make every effort in good faith to reach consensus on all substantive matters. When consensus cannot be reached, a simple majority vote generally will be sufficient, but a two-thirds majority of members present and voting will be required to make decisions on substantive matters related to a protocol. This voting will only take place after the Chair, based on the Bureau's recommendation, confirms that all efforts to reach consensus have been exhausted. Additionally, if there is a question about whether a matter is substantive, it will be decided by a simple majority of members present and voting. Several delegations expressed dissatisfaction with the outcome of the vote on decision-making, indicating that it did not promote a truly inclusive process. To facilitate the discussion of the subject of the second early protocol, the UN Department of Economic and Social Affairs Financing for Sustainable Development Office prepared an unofficial document outlining considerations and examples of issues that could be addressed in the protocol. According to this document, the potential subjects for the early protocols are framed as broad categories that could encompass a wide array of measures for each item. After extensive discussion, draft decision CRP.5 was adopted without a vote, establishing the subject of the second protocol as the prevention and resolution of tax disputes. With regard to this subject, existing tools could be strengthened, and new tools could be tested. Potential measures to avoid disputes may include strengthening coordinated advance agreements and administrative assurance, as well as enhancing cross-border cooperation in joint tax audits. The legal basis for addressing cross-border tax disputes, both within and outside the current tax treaty network, also may be reinforced. This could involve mutual agreement procedures, confidentiality and secure document exchange, arbitration, and nonbinding dispute resolution. At the conclusion of the organizational session, the Chair of the intergovernmental negotiating committee outlined preliminary ideas for organizing the committee's work over the next three years. He emphasized the need for extensive technical work and parallel work streams to ensure effective coordination and resource utilization. His proposed structure includes three main work streams: one focused on the framework convention and two dedicated to the first and second protocols, each potentially supported by task forces. Each work stream is proposed to be co-led by Vice-Chairs from both developed and developing countries. The Chair also indicated that the Bureau would finalize a detailed roadmap by the end of March, which will include guidelines for the work streams, identification of the Vice-Chairs who will lead the work streams, and establishment of the frequency of virtual meetings. Further details remain to be determined, such as the composition of the task forces and the timelines for specific deliverables. The organizational session of the intergovernmental negotiating committee is an important step in the UN's work on a new Framework Convention on international tax cooperation and two early protocols, which will continue this year and the next two years. Companies should monitor ongoing developments with respect to the Framework Convention and the two protocols addressing specific tax matters. Given the potentially significant implications for the international tax landscape going forward, companies may want to engage with policymakers in relevant jurisdictions to share their perspectives.
Document ID: 2025-0492 | ||||||||
