The United Nations Declares Its Intent to Reclaim Leadership in International Taxation from the OECD

On August 8, 2023, United Nations Secretary-General António Guterres released a draft report titled Promotion of Inclusive and Effective International Tax Cooperation at the United Nations (hereafter referred to as the "UN Report"). In this report, the Secretary-General announced the UN's ambition to reclaim leadership in international taxation from the Organisation for Economic Co-operation and Development (OECD). The report stated:

“Strengthening the United Nations’ role in setting tax norms and rules, while fully considering existing multilateral and international arrangements, appears to be the most viable path to ensuring that international tax cooperation is fully inclusive and more effective.”

"Many countries have found significant barriers to meaningful participation in the [OECD’s] agenda-setting and decision-making processes. As a result, substantive rules developed through these OECD initiatives often fail to adequately reflect the needs and priorities of developing countries and/or exceed their implementation capacity."

This raises an intriguing question: Why is it that the UN, the most representative international organization with 193 member states, has ceded leadership in international taxation to the OECD—a group of only 38 primarily developed nations? Despite the OECD's lack of inclusivity, it has managed to dominate the global tax landscape. How does the UN plan to reclaim this leadership from the OECD?

How the UN Lost Its Leadership in International Taxation

Before World War II, the UN's predecessor, the League of Nations, was the undisputed leader in international tax matters. Following the war, although the UN established the Committee of Experts on International Cooperation in Tax Matters (UNTC), the OECD gradually took over as the primary driver of international tax developments, while the UN’s role diminished.

For example:

• While both the UN and OECD have published model tax treaties, most countries have adopted the OECD’s model.
• Recent international tax reforms, such as the Base Erosion and Profit Shifting (BEPS) project and its follow-up, BEPS 2.0, have been spearheaded by the OECD, not the UN.

Several reasons explain this shift:

1. Resource Constraints:
   The UN has limited resources for international tax matters due to its extensive agenda, whereas the OECD, with a narrower focus, can allocate significantly more resources to tax issues.
2. Difficulty Achieving Consensus:
   The UN’s 193 member states vary widely in their economic and political circumstances, making consensus difficult. In contrast, the OECD’s smaller membership, consisting of like-minded developed nations, facilitates agreement.
3. Inefficiency:
   The UN’s decision-making processes are slower and more bureaucratic compared to the OECD’s streamlined operations.
4. Lack of Expertise:
   The OECD boasts a network of working groups, research centers, and international tax experts, giving it a significant edge in technical expertise. The UN, by comparison, often builds on the OECD’s work rather than developing its own comprehensive solutions.