17 Oct 2025 - ote2 - 3 page(s)
Econews I N 67
Over the past month, United Nations member countries started substantive negotiations for the first-ever UN Framework Convention on International Tax Cooperation. The First and Second sessions of the Intergovernmental Negotiating Committee (INC), held in New York from 4–8 and 11–15 August 2025, focused on the Framework Convention and the 2 early protocols. These meetings addressed a range of issues, including the prevention and resolution of tax disputes. This historic process reflects major shifts in global economic governance and geopolitics. The treaty could replace the current global tax system that deprives developing countries of considerable revenues and undermines their capacity to support human rights1.
The OECD's Global Tax Agreement with the two-pillar solution did not take into account the specificities and interests of the countries of the South. To break with this hegemony, the African Group worked to create an alternative and binding international framework that would enhance cooperation on tax matters. These efforts culminated in the adoption of negotiating New Global Tax Rules at the UN by the UN General Assembly on December 22nd, 20232.
The United Nations General Assembly has established an Intergovernmental Negotiating Committee (INC) to draft a United Nations Framework Convention on International Tax Cooperation and two early protocols. This process runs from 2025 to 20273. The Organizational Session in February 2025 marked the start of the three-year process. During this session, "Prevention and resolution of tax disputes" was chosen as the subject of Protocol II4. Tax dispute prevention and resolution refer to the ways in which countries and tax authorities prevent disputes over tax matters and resolve disputes when they happen.
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Focus on cross-border tax dispute and protect national tax sovereignty
During the first and second sessions of the INC, discussions on the protocol gained considerable momentum, while notable divergences emerged around its essential provisions5. For the Global South countries, inclusivity of the convention and its protocols mean creating global rules that are adapted to their capacities and needs, respecting their tax sovereignty, and preventing their dispute resolution from becoming a new source of inequality6.
Building on this perspective, The African Group believes that the protocol should focus on cross-border tax disputes rather than domestic ones7, since these pose the highest risks of legal uncertainty, revenue loss, and double taxation or non-taxation.
This position reflects a fundamental concern for protecting tax sovereignty. African countries are cautious about extending the protocol to domestic tax disputes, which could be seen as an overreach into national jurisdiction. Domestic disputes are considered an internal matter and bringing them under the protocol could undermine the clear distinction between national authority and international cooperation.
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Mandatory arbitration and the North-South split
A strong consensus emerged among African countries (notably Nigeria, Tanzania, Côte d’Ivoire, and the wider African Group) against mandatory arbitration. The mandatory arbitration8 is clauses that could be integrated in bilateral tax treaties as mandatory binding arbitration to resolve disputes that the competent authorities was unable to resolve within a certain time.
Since this mechanism can undermine their sovereignty, particularly their ability to make independent tax policy decisions. African countries feared that arbitration could favor wealthier multinational corporations and OECD countries, which had more legal and technical resources, creating an imbalance. This was a significant issue for developing nations with fewer resources to engage in long and complex arbitration processes9.
In the other hand, The African Group10 and CSO were aligned on the application of alternative dispute resolution mechanism anchored to UN mechanism to help countries with lower administrative capacities11 and support “the building of fair, accessible and balanced dispute prevention and resolution system”12 .
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Where African states and civil society slightly diverge
The African group believed that all provisions on dispute prevention and resolution should be within the framework convention, and all procedural details should go into Protocol 2 and accompanied by technical support and safeguards. In fact, the protocols are optional and become binding only if the States decide to take part in them while framework convention when ratified is mandatory for all.
However, Civil Society was concerned about this approach and believed that all dispute prevention and resolution including procedural details should be addressed within the convention13. They argued that having a consistent and uniform process for resolving disputes is crucial because it leads to greater legal certainty. If countries have different options or aren't required to follow the same steps, it could cause confusion and unpredictability in how disputes are handled.
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Conclusion
The African Group aims to prevent the repetition of global power imbalances that have historically disadvantaged the South, through introducing a new tax adjustment.
Negotiations on the second early protocol on tax dispute prevention and resolution revealed that developing countries are determined to ensure that the emerging Framework Convention reflects their realities and priorities. There is a strong preference for mechanisms that are inclusive, regionally adaptable, accessible to states with limited capacity and respectful for their sovereignty.
Therefore, it is crucial to strengthen coordination among African countries in the next steps of the negotiations, so, they can present unified positions and effectively advocate for their interests.
13 Tove Ryding,” Breaking the ice in the UN Tax Convention negotiations”, (EURODAD,04/09/2025)