Executive summary

On 24 December 2024, the United Nations (UN) General Assembly adopted the Terms of Reference (ToR) for the development of a UN Framework Convention on International Tax Cooperation (Framework Convention). This decision follows the approval of the ToR by the UN Second Committee (Economic and Financial) on 27 November 2024. The ToR outline the structure and objectives of the Framework Convention, including the development of two early protocols addressing key tax issues.

The next steps involve establishing an intergovernmental negotiating committee that will draft the Framework Convention and the two early protocols over the next three years. During the organizational session of the committee, scheduled for February 2025, key decisions will be made regarding the committee's structure and the subject of the second early protocol.

Detailed discussion

Background

On 23 November 2022, the UN General Assembly's Second Committee approved a resolution, introduced by a group of African nations, on the need for a universally inclusive international tax framework. This was subsequently adopted by the UN General Assembly as Resolution 77/244 on 30 December 2022. The resolution initiated intergovernmental talks aimed at crafting an approach for enhancing global tax cooperation that prioritizes inclusivity.

In February 2023, the UN Secretary-General launched a public consultation to collect feedback from stakeholders. Following this, in July 2023, a Secretary-General report titled "Promotion of Inclusive and Effective International Tax Cooperation" was released, outlining three potential paths to creating a more inclusive tax framework: (1) a multilateral convention on tax, (2) a framework convention on international tax cooperation, and (3) a framework for international tax cooperation.

On 22 November 2023, the UN General Assembly's Second Committee approved a resolution on establishing an Ad Hoc Committee to formulate the approach for a Framework Convention. The UN General Assembly adopted Resolution 78/230 on 22 December 2023, with 111 jurisdictions in favor, 46 against and 10 abstentions. The resolution called for finalization of the deliverables by August 2024 for submission to the 79th session of the General Assembly.

On 7 June 2024, the Ad Hoc Committee's Bureau released a "zero draft" for the ToR and requested stakeholder feedback, with more than 100 submissions received. A revised ToR was released in mid-July 2024 and served as the basis for discussions at the second session of the Ad Hoc Committee, held from 29 July to 16 August 2024. These discussions led to the finalization and approval of the ToR by vote on 16 August 2024. The Ad Hoc Committee then adopted and submitted the ToR to the 79th Session of the UN General Assembly for consideration.

On 27 November 2024, the UN Second Committee considered the draft resolution titled "Promotion of inclusive and effective international tax cooperation at the United Nations" (document A/C.2/79/L.8/Rev.1). Hungary, on behalf of the European Union, requested a vote on operative paragraphs 2 and 5 of the draft resolution; the Second Committee voted to retain both paragraphs. It then approved the resolution, including the ToR, in a recorded vote of 125 in favor, 9 against, and 46 abstentions. Consequently, the Second Committee recommended that the General Assembly adopt the draft resolution.

Adoption of the ToR by the General Assembly

On 24 December 2024, the UN General Assembly voted on draft resolutions put forward by the Second Committee (Economic and Financial) on "Promotion of inclusive and effective international cooperation on tax matters at the United Nations" (document A/79/435/Add.6). Before voting on the resolution as a whole, separate recorded votes were requested for operative paragraphs 2 and 5. The General Assembly decided to retain paragraph 2 in a recorded vote of 112 in favor, 49 against and 6 abstentions. It decided to retain paragraph 5 in a recorded vote of 112 in favor, 48 against and 6 abstentions. The General Assembly then approved the resolution as a whole in a recorded vote of 119 in favor, 9 against (Argentina, Australia, Canada, Israel, Japan, New Zealand, Republic of Korea, United Kingdom, United States), and 43 abstentions (including the European Union Member States, as well as Costa Rica, Switzerland and United Arab Emirates).

With this vote, the UN General Assembly adopted the ToR for the development of a UN Framework Convention on International Tax Cooperation.

Among the key elements of the ToR is a stipulation that two early protocols should be developed simultaneously with the Framework Convention. One of the early protocols is intended to address the taxation of income derived from the provision of cross-border services in an increasingly digitalized and globalized economy. The subject of the second early protocol will be decided at the organizational session of the intergovernmental negotiating committee and is to be drawn from the following specific priority areas: (a) Taxation of the digitalized economy, (b) Measures against tax-related illicit financial flows, (c) Prevention and resolution of tax disputes, and (d) Addressing tax evasion and avoidance by high-net worth individuals and ensuring their effective taxation in relevant countries.

According to the relevant program budget statement (document A/C.5/79/25), the activities contemplated by the ToR would require additional funds of almost US$6m in 2025 alone.

Next steps

With the adoption of the ToR by the UN General Assembly, the next phase involves the establishment of an intergovernmental negotiating committee. This committee will be responsible for drafting the Framework Convention and the two early protocols over the next three years.

The organizational session of the intergovernmental negotiating committee is expected to take place from 3 to 6 February 2025. During this session, the committee will address organizational matters, including decision-making rules and the election of the bureau, which will consist of a Chair, 18 Vice-Chairs and a Rapporteur elected on the basis of equitable geographical representation. Additionally, the subject of the second early protocol will be decided during this session, chosen from the specific priority areas outlined in the ToR.

The intergovernmental negotiating committee is scheduled to meet three times a year in 2025, 2026, and 2027, with each session lasting no more than 10 working days. The committee is expected to complete its work and submit the final text of the Framework Convention and the two early protocols to the General Assembly for consideration in the first quarter of its eighty-second session in 2027.

Implications

The adoption of the ToR by the UN General Assembly is an important step in the UN's work on a new Framework Convention on international tax cooperation. This development sets the stage for the formation of the intergovernmental negotiating committee, which early in 2025 will determine the substantive topic of the second early protocol and establish the committee's structure and decision-making rules.

Companies should monitor ongoing developments with respect to the Framework Convention and the two forthcoming protocols addressing specific tax matters. Given the significant potential implications for the international tax landscape going forward, companies may want to engage with policymakers in relevant jurisdictions to share their perspectives.