The international tax system requires reforms and this is particularly important for developing countries. The UNCTAD 2024 report emphasizes that current tax mechanisms do not ensure fair resource distribution. As a result, countries in the Global South face a lack of funding necessary for sustainable development.
One of the key issues is tax competition. Developing countries are forced to lower tax rates to attract foreign investments. This undermines their tax base and limits budget revenues. The report notes that such practices exacerbate inequality and hinder the provision of public goods.
Another issue is aggressive tax planning by international corporations. Many large companies use complex schemes to minimize tax obligations. As a result, a significant portion of profit is transferred to low-tax jurisdictions, leaving developing countries without funds to finance critical programs.
UNCTAD suggests a path forward – the creation of an international tax architecture under the UN’s auspices. This involves a framework convention that will support transparent and fair tax practices. Such an initiative could eliminate gaps in existing agreements and give developing countries more opportunities to increase tax revenues.
The potential benefits of the new architecture are significant. Firstly, improving tax revenues would enable countries in the Global South to invest in infrastructure and social programs. Secondly, this would help reduce dependence on external borrowing, lower debt burdens, and enhance financial stability.
The report highlights that the implementation of a fair tax system requires efforts from all participants. Developed countries need to support initiatives for creating a unified taxation standard. This would reduce opportunities for tax evasion and create equal conditions for all market participants.
The UN convention will become an important tool in combating capital flight and tax evasion. According to experts, illegal financial flows can account for up to 50% of official trade in some countries. This undermines the economy and limits resources available for development.
Overcoming political disagreements will be a significant task. Some states may resist the introduction of new rules, fearing for their economic sovereignty. However, the overall benefit of increasing tax fairness is evident. Successful implementation will require active participation and coordination among various countries.
UNCTAD proposes two paths forward. The first is strengthening regional and bilateral agreements. The second is promoting a framework convention at the global level. Both strategies are aimed at achieving transparency and improving tax discipline.
An important step will be organizing the work of a specialized UN committee. Its tasks will include developing criteria and procedures for implementing the convention. The goal is to ensure fair taxation for all, especially for developing countries, which often lack sufficient resources to protect their interests on the international stage.
In conclusion, creating an international tax system under the UN’s auspices is a necessary measure for strengthening the economies of the Global South. Fair taxation will help increase development funding, reduce debt burdens, and improve the quality of life. International cooperation in this area will become the key to sustainable and fair development for all countries.
Prepared by: Alen Serik, expert of the Economy KZ portal
