Donald Trump’s return to the White House has come with drastic changes threatening international co-operation, including withdrawing support for the Organisation for Economic Co-operation & Development (OECD) 2021 global tax agreement, walking out of the UN Framework Convention on International Tax Co-operation earlier this month, slapping tariffs on allies, and again exiting the Paris Climate Agreement. SA was on the receiving end of these actions with USAID withdrawal and the threat of sanctions due to its Expropriation Act.
Despite a long history of the US and its allies using their power to influence global agreements and determine, or block, international co-operation, SA has always been a strong proponent of international co-operation and supported the Global South’s position on a progressive global tax order. However, its allies are raising concerns because it is supporting both the UN Convention and the OECD’s two-pillar framework in G20 processes. We argue that this position will compromise African unity on international tax co-operation, so we call on SA to reaffirm its commitment to the UN Convention process.
Historically, the sole counter to Global North supremacy has been Global South unity. This unity kick-started the process towards a UN Tax Convention in 2022, culminating in the negotiations running from 2025-2027. The UN Tax Convention process is a once-in-a-lifetime chance to rewrite global tax rules that are almost 100 years old. The rules were originally designed in the interests of wealthy states and enable about $1.42-trillion in corporate tax dodging each year through the use of tax havens and other forms of aggressive tax evasion. This should be a priority for us. We lose billions of rand (at least $2bn in 2024 but likely more) to these outflows at a time of sustained austerity and collapsing public services.
However, as anyone who has followed the UN’s climate processes knows, the UN Tax Convention is not guaranteed to live up to its potential. Wealthy European and North American states have been vocal critics of the process, preferring that international tax matters stay within the ambit of the OECD — an undemocratic body that represents their interests, though it has a long-held authority on international tax rule making. It was the OECD that produced the heavily criticised “two-pillar plan” for implementing a global minimum tax on corporations, and for taxing digital services. Africa and the Global South will need to work on common positions, and stand firm during the next three years of negotiations to secure the kind of reforms needed to end tax dodging and illicit financial flows.
On the one hand, SA has always been a strong supporter of the Africa Group’s position on moving tax discussions away from the OECD and to the UN. Beyond voting in line with this bloc, SA diplomats have stated that “a UN Tax Convention will set global standards and create the mechanisms for transparency and accountability to address illicit financial flows and corporate tax abuse, among other things. The UN is the most appropriate venue for this discussion due to its universal membership and all-inclusive character.”
In November 2023 the SA representative at the UN General Assembly got straight to the point saying, “It is high time that the international community addresses this injustice in global taxing rights that is impoverishing millions, which goes back to the League of Nations, when most member states were colonies and which has been perpetuated by the monopoly that rich country clubs have held over international tax rule-making.”
However, the SA government has also been playing the other side. In 2021 Tito Mboweni (then finance minister) penned a joint letter with his US counterpart, calling for all countries to sign the OECD’s two-pillar deal — a call that was rejected by civil society as well as by countries such as Kenya, Nigeria, Pakistan and Nepal, which had already pointed out flaws in the plan. In 2024 the Global Minimum Tax Act was signed into law, implementing the provisions of the OECD’s global minimum tax.
When the authors of this piece engaged with the National Treasury officials around these concerns, they said the Treasury could not “say no to revenue now”, as it “waits and sees” what the outcome of the UN negotiations would bring. In October the National Treasury’s head of tax policy said there was a need for SA to maintain “stability in the international tax system”. Not only is it difficult to reconcile this language with the call to break the “monopoly that rich country clubs have held over international tax rule-making”, but it also points to a worrying reluctance of Treasury officials to truly champion the UN Tax Convention, rather than being a passive supporter.
We are also worried that the implementation of the OECD proposal might prejudice the government against the idea of pushing for a more radical reform on the same issue at the UN. For instance, SA is in support of certain positions in the UN Tax Convention, such as a high-level commitment to ensuring equitable taxation of multinational enterprises. However, it is also keen to continue implementation of the two-pillar solution that has been severely criticised for the diminished taxing rights that it leaves for African countries.
The above concerns are only amplified by SA chairing the G20 in 2025. The G20 agenda and meetings prioritise the OECD’s two-pillar framework for its tax work without any reference to discussions at the UN. Moreover, SA is expected to host the next OECD-G20 Inclusive Framework plenary meeting later this year. There is a risk that the diplomatic pressure that comes with the G20 presidency may result in SA breaking ranks with the Africa Group and falling in line with OECD member states in trying to “rescue” the OECD’s two-pillar plan.
As the UN Tax Convention negotiations continue in 2025, SA has a choice to make — strengthening true multilateralism by actively championing the development of the UN Convention or continuing to lend credibility to the OECD two-pillar framework (which lacks ambition and will do little to curb tax abuse and illicit financial flows for the Global South). Given SA’s strong diplomatic reputation and influence, the latter would be a significant setback for African unity. The former would be a major step forward in the fight against illicit financial flows, tax evasion and multinational corporate impunity.
We call on the SA government, and the National Treasury, in particular, to affirm its commitment to achieving true progressive reform of the broken international financial architecture by committing to support and actively shape and champion the UN Tax Convention process.
• Oelofsen is with the Alternative Information & Development Centre.
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