Global Economic and Development Policies

SouthViews No. 278, 27 November 2024

Undue High Expectations of the G20 Common Framework: Urgent Need to Reform the International Debt Architecture

By Yuefen Li

This article stresses how international debt architecture reform requires innovative solutions beyond the G20 Common Framework, and should be addressed at the 4th International Conference on Financing for Development.

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Tax Cooperation Policy Brief No. 39, 20 November 2024

Determining the Upper Bound of the Scoping Criteria for Amount B in the OECD/G20 Two-Pillar Solution: A Policy Guide for Developing Jurisdictions

By Chetan Rao, Ruchika Sharma, and Dr. Vijit Patel

Amount B, a component of the OECD/G20 Two-Pillar Solution, has been designed to simplify transfer pricing for baseline distribution activities. With the aim of developing a practical policy guide for developing jurisdictions to fine tune the quantitative scoping criterion under Amount B, i.e., “annual operating expense to annual net revenue” ratio, this paper critically analyses various aspects of this criterion. The upper bound of this ratio is purported to help jurisdictions in identifying baseline distributors. It is currently set as a flexible range from 20% to 30%, with the choice available to each adopting jurisdiction deciding the exact point in the range for implementation of Amount B within its jurisdiction. Given the lack of any data-backed rationale in the Amount B report for development of this range, the authors suggest that the upper bound range might have been politically negotiated. For this very reason, developing countries need to tread carefully while setting the upper-bound and consider both its tax as well as policy implications. Through an empirical analysis of independent distributors in India, the paper highlights the link between the upper bound, functionality, and profitability, illustrating how these metrics impact developing countries with lower asset and expense intensities. The findings suggest that setting the upper bound at the higher end of the range could unintentionally bring above-baseline distributors into scope, thus foregoing long-term taxing rights for developing jurisdictions. Through this analysis, the paper offers practical insights and recommendations for jurisdictions, especially developing ones, for setting this upper bound to protect their taxing rights and minimize risks of misclassification of above-baseline distributors as baseline.

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SC Statement at the 2024 Social Forum of the Human Rights Council, 31 October 2024

Statement by the South Centre at the 2024 Social Forum of the Human Rights Council

31 October 2024

At the Human Rights Council Social Forum, South Centre Senior Programme Officer Abdul Muheet Chowdhary presented key international tax reform inputs to the upcoming Fourth International Conference on Financing for Development (FfD4) for “The Contribution Of Financing For Development To The Advancement Of All Human Rights For All”.

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South Centre Statement to G-24, 21 October 2024

STATEMENT BY DR. CARLOS CORREA, EXECUTIVE DIRECTOR OF THE SOUTH CENTRE, TO THE MINISTERS AND GOVERNORS MEETING OF THE INTERGOVERNMENTAL GROUP OF TWENTY-FOUR (G-24)

21 October 2024, Washington D.C.

The South Centre participated in the G-24 Annual Meeting of Ministers and Governors in Washington D.C. See our statement:

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Research Paper 211, 14 October 2024

The Implications of Treaty Restrictions of Taxing Rights on Services, Especially for Developing Countries

By Faith Amaro, Veronica Grondona, Sol Picciotto

Taxation of cross-border services has been identified as a high priority issue in the United Nations (UN) negotiations to establish a new global framework for tax. This paper analyses the defects of international tax rules as applied to services, and their exploitation by multinational enterprises (MNEs), focusing on the impact on developing countries. Services have become increasingly important for economic development, but international tax rules favouring delivery by non-residents act as a disincentive to the growth of local services providers, particularly disadvantaging developing countries which are mainly hosts to MNEs. We analyse the restrictions on source taxation of services in tax treaties, particularly those based on the model of the Organisation of Economic Co-operation and Development (OECD), and show that their spread has been accompanied by a widening deficit in services trade of developing countries, while the weakening of their attempts to protect their tax base through withholding taxes has resulted in increasing losses of tax revenue. The paper combines detailed qualitative analyses of tax treaties with quantitative estimates of their effects on trade and tax revenues for services of five developing countries: Argentina, Brazil, Colombia, Kenya and Nigeria. Our analysis suggests that a new approach is needed for taxation of services, breaking with the residence-source dichotomy, and adopting formulary apportionment. This could be based on the standards agreed in the Two Pillar Solution of the OECD/Group of Twenty (G20) project on base erosion and profit shifting (BEPS) and developed now through the UN.

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Geneva Graduate Institute and South Centre Report, September 2024

Analysis of Imbalanced Tax Treaties of Developing Countries

Insights From the Tax Treaties Explorer Database

By Aiwei Feng, Shristi Joshi and Quinn McGannon

This report will start from exploring the historical background, theoretical frameworks, and practical implications of tax treaties, with a specific focus on their impact on developing countries. Utilizing diverse literature and datasets, including the Tax Treaties Explorer (TTE) from the International Centre for Tax and Development, it aims to identify restrictive tax treaties and provisions disadvantageous to developing nations. The methodology involves desk reviews, data analysis, and case studies to offer insights into challenges faced by developing countries in international taxation. By scrutinizing key provisions like those concerning permanent establishment and withholding taxes, it aims to highlight how treaties affect revenue generation, economic sovereignty, and development outcomes of South Centre Member States. South Centre Member States have been chosen for the purpose of this study due to their status as developing countries with much to gain from renegotiating their existing tax treaties.

Ultimately, this study intends to fill the gap in terms of treaty research and development of tax treaties of South Centre Member States by identifying their restrictive tax treaties and provisions therein with Organisation for Economic Co-operation and Development (OECD) countries. The choice of OECD countries reflects their status as mostly developed countries. At the same time, the study also intends to supplement tax treaties literature so far dominated by legal and economic analyses by focusing specifically on identifying specific restrictive provisions.

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South Centre Statement to HRC57, September 2024

Statement by the South Centre at the 57th Session of the Human Rights Council on “Realizing the right to development: The case for a United Nations framework convention on international tax cooperation 

September 2024

At the 57th session of the Human Rights Council, South Centre outlined the possible content of protocols to the United Nations Tax Convention for taxing Illicit Financial Flows & Digital Services.

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SouthViews No. 274, 30 August 2024

Review: Taxation and Inequality in Latin America: New Perspectives on Political Economy and Tax Regimes (2023)

By Abdul Muheet Chowdhary

The volume Taxation and Inequality in Latin America: New Perspectives on Political Economy and Tax Regimes is an insightful collection of articles about the patterns of inequality in Latin America and detailing the nature of tax avoidance and evasion in the region, with lessons from political attempts to bring about progressive reforms and tax considerations for policymakers about the future of the region’s development.

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SC Statement on Adoption of Draft TORs for UN Tax Convention, August 2024

Statement by the South Centre on the Adoption of the Draft Terms of Reference for a UN Framework Convention on International Tax Cooperation

August 2024

The South Centre welcomes the adoption of the draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation (UNFCITC). The UNFCITC can establish a fair and equitable international tax system for developing countries.

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SouthViews No. 271, 31 July 2024

UNCTAD at 60: Reflections on six decades of promoting economic development for the Global South

By Yuefen Li and Danish

The United Nations Trade and Development (UNCTAD) celebrated its 60th anniversary in June 2024 in Geneva, holding a high-level Global Leaders Forum that brought together ministers, officials and experts to discuss the multidimensional challenges facing countries, and strategies for advancing the UN 2030 Agenda for Sustainable Development. It highlighted the need for innovative solutions to address current global crises that can promote resilience, economic growth and sustainable development.

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SouthViews No. 270, 26 July 2024

Honduras’ Tax Justice Law: Increasing tax collection to achieve the SDGs without increasing tax rates

By Abdul Muheet Chowdhary, Kuldeep Sharma and Kolawole Omole

In April 2023, the government of Honduras submitted a tax reform bill called the “Tax Justice Law” to the National Congress through which it intends to reform the Honduran tax system with potential for improved revenue collection, that too, without introducing new taxes or increasing tax rates. The law aims at Constitutional recognition that tax collection must be progressive, change the principle of taxation from territorial to worldwide taxation of income, introduce Ultimate Beneficial Ownership requirements that inter alia aim to repeal bearer shares, facilitate exchange of information with other jurisdictions, eliminate banking secrecy for tax purposes, implement credit method in domestic legislation to eliminate double taxation, amend the Constitution so as to limit tax exemptions to a maximum period of 10 years, restore transfer pricing audits to check abusive claim of tax incentives and eliminate the possibility of forgiving tax debts. The provisions contained in the Tax Justice Law are timely and welcome, particularly in light of the Global Minimum Tax. They can improve government revenues, reduce public debt and create the fiscal space for achieving the Sustainable Development Goals.

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