EU pressured to support new global tax rules

The European parliament has passed a resolution calling for the European Union (EU) to support the negotiation of a new United Nations (UN) tax convention, which would affect wealthy individuals and multinational corporations if passed.

The new tax convention will be discussed at the 78th session of the UN General Assembly. If it is adopted by the UN, it would allow all countries to set global tax standards and allow them to collect tax from multinational corporations and wealthy people who store wealth in overseas tax jurisdictions.

The EU Parliament’s resolution is significant because it puts pressure on EU member states to show support for formal negotiations on a UN tax convention. Up to this point, the EU has not shown support for the move to set global tax laws. Instead, it has stated it is in favour of rich countries in the Organisation for Economic Cooperation and Development (OECD) continuing to set tax rules for the wealthy.

The EU’s argument for not supporting the new UN move, is that it would duplicate the work being done by the group of rich countries which are already working to improve global tax laws. But countries pushing for global tax laws have countered that argument, stating that the UN laws would, in contrast, be inclusive, transparent and accountable — unlike the rules the OECD has set for decades.

Alex Cobham, chief executive at international lobby group Tax Justice Network, has shown support for the new UN move, stating that getting tax from the rich would help countries that are struggling with multiple challenges such as climate change and inequality.

“It is more vital than ever that international rule-setting allows every country to combat the tax abuse of multinational companies and rich individuals with offshore assets. Rule-setting by a small group of rich countries at the OECD is not only unjust but has been completely ineffective – leaving people all around the world exposed to nearly half a trillion dollars of tax losses every year. Those funds are crucial to invest in our futures,” Cobham stated.

With this new move to set global tax standards, jurisdictions like the BVI, that have a strong financial services industry could be affected. However, the full implications for financial services industries around the world are not yet known.