Asian civil society calls for fair and equitable tax norms

Penang, 14 August (Lean Ka-Min): As countries around the world work to draw up new global tax rules, Asian civil society groups are urging the region’s governments to push for an ambitious outcome that can generate more public revenue to finance development.

The fifth and latest round of intergovernmental negotiations to draft a United Nations Framework Convention on International Tax Cooperation was held at UN headquarters in New York on 3–13 August.

Asian civil society organisations monitoring the talks, including the Asian Peoples’ Movement on Debt and Development (APMDD) and the Malaysia-based Third World Network (TWN), underscored the need for a multilateral tax regime which will, among others, rein in tax dodging that is depriving governments of billions in budgetary resources. The loss of these funds undermines the fiscal resilience of Asian countries weighed down with sovereign debt burdens and beset by climate vulnerability.

APMDD, TWN and partner organisations called on governments in Asia to end the “race to the bottom” of one-upping each other in offering corporate tax cuts, a practice that only shrinks public coffers. Instead of such tax competition, Asian nations are called upon to engage in cooperation in the UN talks to forge fairer tax standards.

The Intergovernmental Negotiating Committee (INC) was established by the UN General Assembly to develop a new global agreement. The terms of reference adopted in November 2024 mandate the establishment of an “inclusive, fair, transparent, efficient, equitable, and effective international tax system for sustainable development”. Work started in February 2025.

One of the provisions recommended for the UN convention by tax justice advocates is unitary taxation. Under the prevailing “arm’s length” principle of taxation, a country can only tax a multinational corporation’s profits declared within its own borders, with the various national subsidiaries of the firm all taxed separately by the respective countries. Such an arrangement allows multinationals to shift their profits and declare them in tax havens. In contrast, unitary taxation would treat the multinational as a single entity with a unified profit. How much of the profit is allotted to each country to tax is then determined by a formula that can take into account the percentage of the company’s sales and workforce which comes from that country.

This system leaves less room for accounting gymnastics and ensures that multinationals are taxed where they actually do business. And since a lot of this business takes place in the major consumer markets and production hubs of Asia, the region stands to gain a greater – and fairer – amount of tax resources to fund its development efforts. As TWN’s Executive Director Chee Yoke Ling said, “Replacing arm’s-length accounting with unitary taxation and formulary apportionment is the only path to genuine fiscal sovereignty for Asia’s market- and labour-heavy economies.”

Recent research bears this out. According to a study by Public Services International and the Tax Justice Network, countries in the Asia & Oceania region can collect additional tax revenues averaging $70.9 billion each year if a unitary taxation regime were in place. India, for example, would see a revenue surge of $43.2 billion a year, a 194% increase over what the same multinationals are currently taxed in the country. The proportional gain is even heftier for some debt-stressed or climate-vulnerable Asian economies: Sri Lanka is projected to gain $6.75 billion (+1,101%), Bangladesh $2.60 billion (+697%), the Philippines $5.79 billion (+341%), Pakistan $1.67 billion (+179%), Vietnam $5.01 billion (+158%), and Indonesia $9.55 billion (+106%). Thailand could see a substantial increase of $2.09 billion (+43%).

While a more equitable international tax architecture is long overdue, establishing it is a challenge, as the difficult UN negotiations show. “Civil society leaders insist that only a robust and ambitious UN Tax Convention can deliver benefits for sustainable development, but some rich countries and corporate lobby groups are attempting to water it down,” noted Jeannie Manipon, APMDD Development Finance Program Manager and Co-Coordinator of Tax and Fiscal Justice Asia (TAFJA).

In the face of this resistance, civil society campaigners are calling on Asian delegations to form a common front with their counterparts from other developing countries. “The historic opportunity before us at the UN will be realised if the Group of 77 and China stand united. … Asian, African and Latin American governments must act as one to secure the funding needed for climate action, public services and economic justice,” stressed Charles Santiago, APMDD Regional Committee member and Director of Monitoring Sustainability of Globalisation.

Such solidarity will likely be called for if the interests of the Global South are to make headway in the negotiations that are scheduled to be completed in July 2027.

In addition to a “zero draft” of the Convention, two early protocols under the Convention were also discussed in the recent negotiation session: on taxation of income from cross-border services, and on dispute prevention and resolution.

“Taxation of cross-border services, especially through digital means, is crucial for us in Asia. The century-old international architecture allows companies to evade taxes and the foregone revenues disproportionately hurt developing nations,” said Tony Salvador of TWN, highlighting the major gaps in taxation of digital services exacerbated by the boom of artificial intelligence.

The Global Alliance for Tax Justice (GATJ), which coordinates civil society participation in the negotiation sessions, facilitated substantive and procedural proposals on the three documents discussed. “This session was a clear signal: countries are pushing us towards a more fair and equitable international tax system,” commented Dereje Alemayehu, Executive Coordinator of GATJ. “The negotiations for a Framework Convention on tax get to the heart of the issues of our broken global tax rules: fairly sharing between countries the ability to tax multinational corporations, effectively taxing the rich, ensuring a transparent international tax system. The session saw strong engagement on these topics showing that the debate is open and moving forward. As civil society, we are calling for continued ambition as the negotiations progress.” 

The next round of the negotiations will convene in Nairobi in November. The United States walked out of the process in February 2025 but this has not stopped the momentum maintained by a large number of developing countries, especially the Africa Group. – Third World Network