Recently the United Nations published a policy brief "Reforms to the International Financial Architecture" [1] . It sets out action-oriented recommendations for reforming the international financial and tax architecture in six areas:
a) Global economic governance;
b) Debt relief and the cost of sovereign borrowing;
c) International public finance;
d) The global financial safety net;
e) Policy and regulatory frameworks that address short-termism in capital markets, better link private sector profitability with sustainable development and the Sustainable Development Goals, and address financial integrity;
f) Global tax architecture for equitable and inclusive sustainable development.
Most multilateral tax agreements have been developed only recently and in forums without universal participation. Norms are being developed in forums in which countries with the greatest needs do not participate, or in forums in which they do participate but without sufficient inclusivity.
The result is that countries with the greatest needs are not benefiting from the development of new international tax norms. This deficiency limits the potential effectiveness of tax norms and the tax system over time.
Progress in improving tax transparency is emblematic of this challenge. The terms of the governing instruments and their high confidentiality demands effectively exclude most developing countries from accessing information that could help them to more effectively tax high-net-worth residents or multinational enterprises operating in their countries.
The slow progress in responding to calls by developing countries for inclusivity in tax cooperation frameworks has damaged faith in multilateralism and the promise of the Addis Ababa Action Agenda, but it has also led to renewed calls for a fair and effective international tax system for sustainable development that reflects the concerns and capacities of all countries.
• Explore options to make international tax cooperation fully inclusive and more effective.
• Simplify global tax rules to benefit underresourced developing country tax administrations
• Significantly increase the global minimum corporate income tax rate to be close to the statutory tax rates in most developing countries and give preference to source country taxation.
• Create non-reciprocal tax information exchange mechanisms to benefit developing countries.
• Publish beneficial ownership information for all legal vehicles
The reforms outlined in the policy brief are motived by the failure of the current international architecture to fulfil its core tasks and to support long-term stable financing for the Sustainable Development Goals, including investments in the rights to education, health and social protection.
The Sustainable Development Goal and Paris Agreement targets will clearly not be met if the international financial architecture does not channel resources at scale and speed to the world’s most vulnerable economies.
This failure poses a growing and systemic threat to the multilateral system itself, driving deepening divergence, geoeconomic fragmentation and geopolitical fractures across the world.
To avert such outcomes, we must pursue ambitious reforms and advance on all the proposals in the brief.
They should be regarded as a paradigmatic shift in the structuring of international economic and financial relationships that, as a package, support the convergence of countries towards sustainable development. We need to enable more sustainable and inclusive development pathways for all countries, aligned with the Sustainable Development Goals and anchored in "beyond GDP" metrics.
This will require new forms of international cooperation, underpinned by an architecture fit for purpose in the twenty-first century, across the financial and monetary system, tax, trade, environmental stability and climate action, and other development issues.
Our current multilateral system does not fit this bill, but it can, with the reforms that it propose in the present policy brief.
[1] https://www.un.org/sites/un2.un.org/files/our-common-agenda-policy-brief-international-finance-architecture-en.pdf
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