International Tax

Research Paper 199, 10 June 2024

A Toss Up? Comparing Tax Revenues from the Amount A and Digital Service Tax Regimes for Developing Countries

By Vladimir Starkov and Alexis Jin

In this paper, we attempt to estimate the tax revenues to be gained by the Member States of ATAF, WATAF, AU and the South Centre under the Amount A and an alternative stylized DST taxation regime. Our research demonstrates that the comparative revenue effects of the Amount A and DST taxation regimes largely depend on (a) the mix of relevant domestic economic activities at market jurisdictions (i.e., revenues sourced to the country as a market jurisdiction under Amount A and the level of revenues from automated digital services generated in the country), (b) design details of the DST regime such as the DST tax rate and the nature of activities to be taxed and (c) the relief from double taxation, if any, countries will grant to domestic and foreign taxpayers under DST. This paper contains analysis relying on sources of information available to private sector researchers and it does not involve review of any information that individual taxpayers provided to tax authorities.

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Tax Cooperation Policy Brief No. 38, 15 May 2024

The Design of a UN Framework Convention on International Tax Cooperation

By Sol Picciotto

The creation of a UN-led framework for international tax cooperation is an opportunity for an institutional and conceptual reset, to re-establish a global perspective that has been disrupted by the assumption of an increasingly dominant role in international tax by the OECD. The OECD’s expansive proselytisation of its approach, aiming to encourage foreign investment by restricting taxation of income at source where it derives, has paradoxically taken place in counterpoint with growing concerns about the evident dysfunctionality of that approach. The current process should learn from the past to design a global framework fit for the future, by embodying the aims and general principles that have come to be recognised especially in the recent period as essential guideposts for effective international tax reform.

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G-24 South Centre Call for Papers

G-24 South Centre Call For Papers: Comparing tax revenues to be generated from United Nations and OECD Subject To Tax Rule (STTR)

Deadline – 1 July 2024

The G-24 and the South Centre have launched this Call For Papers providing funding for studies which can produce country level comparative revenue estimates of the UN and OECD STTR on the 65 combined Member States of the South Centre (available here) and the G-24 (available here). The data should clearly provide how much revenue each Member State will get if they opt for the UN STTR vs the OECD STTR. The objective is to help Member States of both intergovernmental organizations make informed decisions on adopting the version of the STTR which is more beneficial to them.

Member States of the G-24 and the South Centre are advised to wait till the publication of the results of this study before taking a decision on whether or not to sign the OECD STTR MLI.

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SCTI Annual Report 2023

2023 ANNUAL REPORT ON THE ACTIVITIES CARRIED OUT BY THE SOUTH CENTRE TAX INITIATIVE

The South Centre’s interventions have had a significant impact in helping developing countries bring about major reforms to the international tax system in 2023. Key achievements include the passage of the historic resolution in the United Nations General Assembly for the initiation of a UN Framework Convention on International Tax Cooperation, the successful end of a twenty year long negotiation in the UN Tax Committee for taxing computer software, the passage of an enhanced version of the Subject to Tax Rule in the UN Tax Committee for ending non-taxation in tax treaties, country level revenue estimates on the OECD digital tax solution vs Digital Services Taxes for the 85 combined Member States of the South Centre and the African Union, and extensive in-country capacity building for several South Centre Member States for taxing the digital economy and tax treaty negotiations.

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SC Statement to ECOSOC Special Meeting – Net Wealth Taxes, 18 March 2024

THE ROLE OF NET WEALTH TAXES IN PROMOTING EQUALITY AND FINANCING THE SDGS

South Centre Statement to ECOSOC Special Meeting on International Cooperation in Tax Matters

18th March 2024

The South Centre, an intergovernmental think tank of developing countries with 55 Member States from Asia, Africa and Latin America and the Caribbean, is pleased to share its views on the role of net wealth taxes in promoting equality and financing the SDGs.

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SC Statement to ECOSOC Special Meeting – Tax Cooperation at UN, 18 March 2024

PROMOTING INCLUSIVE AND EFFECTIVE TAX COOPERATION AT THE UN

South Centre Statement to ECOSOC Special Meeting on International Cooperation in Tax Matters

18th March 2024

The South Centre, an intergovernmental think tank of developing countries with 55 Member States from Asia, Africa and Latin America, congratulates the Chair and Members of the Bureau on their appointment to the all-important ad hoc committee to elaborate the Terms of Reference (ToR) for a UN Framework Convention on International Tax Cooperation (“UN Tax Convention”). The Ad Hoc Committee has a genuinely historic mandate as it has to design the architecture of the long-standing demand of the developing world for a UN Tax Body…

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South Centre Inputs – UN Tax Convention, 15 March 2024

South Centre Inputs on “Terms of Reference for a UN Framework Convention on International Tax Cooperation”

15 March 2024

The South Centre provided its inputs to the work of the United Nations’ Ad Hoc Committee to draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation. The Chair of the Ad Hoc Committee invited stakeholders to provide inputs to inform the work to be undertaken by the Committee.

The Terms of Reference are the foundation of the architecture of the Convention, which has the potential to fundamentally reform the international tax system to make it fairer for developing countries.

The Ad Hoc Committee was constituted consequent upon the historic resolution adopted by the General Assembly on 22nd December 2023. The United Nations Framework Convention aims to strengthen international tax cooperation and make it fully inclusive and more effective.

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South Centre Annual Report 2023

South Centre Annual Report 2023

The South Centre carries out multiple activities to support developing countries with policy-oriented research, inputs and advice for negotiations and capacity building. See a summary of the South Centre’s activities in the Annual Report 2023.

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Research Paper 189, 21 December 2023

Status of Permanent Establishments under GloBE Rules

By Kuldeep Sharma

The objective of this Research Paper is to comprehensively identify and analyse all Permanent Establishment (PE) related provisions under the global minimum tax of the Organisation for Economic Co-operation and Development (OECD), which is implemented through the Global Anti Base Erosion (GloBE) Model Rules. The analysis has led to the conclusion that PEs hold a significant position and facilitate application of GloBE Rules.

The GloBE Rules have introduced certain new facets involving application of PE provisions when there is no tax treaty; no Corporate Income Tax (CIT) in the source state, and have brought in the concept of stateless PEs. These newly-introduced facets have widened the scope of PEs to enable application of the GloBE Rules in specific situations which would otherwise have remained outside the ambit of taxation.

The paper concludes with an observation that the OECD’s Inclusive Framework is drafting the provisions of Amount A in a manner that results in consistency with GloBE Rules.  Likewise, acceptance of “deemed PE” for GloBE rules should be extended to Amount A as well.  By doing so, a tax nexus would be provided in source jurisdictions, which will allow profits attributable to Multinational Enterprises (MNEs) in a digitalized economy (without physical presence) getting taxed under domestic rules of these source (market) jurisdictions.  This would have been a much simpler solution and would have eliminated the complexity of Amount A rules to a large extent, as we see today.

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SC Statement – Conference on SSC in International Tax Matters, 27 November 2023

Opening Remarks by Dr. Carlos Correa, Executive Director of the South Centre, at the “Conference on South-South Cooperation in International Tax Matters: Don’t cede your taxing rights by signing a blank cheque”, co-organized with the Global Alliance for Tax Justice (27 November 2023)

The Conference is taking place at a time of severe challenges to the global economy and, particularly, for the achievement of the Sustainable Development Goals. Rising borrowing costs, tight global financial conditions and high debt burdens are constraining the fiscal space of many developing countries. These conditions make domestic resource mobilization through tax collection more important than ever. The taxation of foreign multinational corporations in the digital economy, in particular the Big Tech firms, has now become imperative both for providing much-needed revenues and for levelling the playing field of domestic companies in our countries.

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SC Statement – UN Resolution on UN Framework Convention on International Tax Cooperation, 23 November 2023

Statement by the South Centre on the Historic UN Resolution Calling for a UN Framework Convention on International Tax Cooperation

 23 November 2023

 The South Centre strongly welcomes the adoption on 22 November 2023 of the historic resolution in the Second Committee of the UN General Assembly on the “Promotion of inclusive and effective international tax cooperation at the United Nations”. The resolution calls for establishing a “Member State-led, open-ended ad hoc intergovernmental committee for the purpose of drafting terms of reference for a United Nations framework convention on international tax cooperation” and is arguably the most significant development in international taxation in the modern era. The South Centre has been actively engaged in supporting these negotiations, in partnership with various institutions from the Global South and allies from the Global North, and commends the African Group in the UN in New York for their leadership of the developing world in steering through this momentous resolution.

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SC & IHEID Report, October 2023

Taxation of the Digital Economy 

by Adnan Sose, Nicolás Tascon and Anders Viemose

As globalisation has pushed through complex inter-State trade in goods and services, in parallel there is a growing complexity in determining the taxation of Multinational Enterprises (MNEs) in an increasingly digitalized economy. This report reviews existing bilateral tax treaties between South Centre’s Member States and States where most digitalised MNEs are headquartered, using a threshold of EUR 750 million in annual turnover to limit the number of in-scope MNEs in the study. This analysis produced primary data on South Centre Member States’ source taxing rights scores and the implications of this on tax treaty negotiations to enable effective taxation in the digital economy through the inclusion of the United Nations (UN) solution for digital taxation, Article 12B of the UN Model Tax Convention. Further, the study sought to identify ‘weak’ tax treaties with low source taxing rights which merited a comprehensive renegotiation beyond the inclusion of Article 12B. Furthermore, the reports examined the treatment of “Computer Software” in the tax treaties under study, and concluded with recommendations going forward.

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