4th March 2025 (14 Topics)
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The world must unite against American obstruction
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Context
Former US President Donald Trump’s opposition to the UN tax convention threatens global efforts to tax multinationals fairly. His tariff threats and withdrawal from negotiations highlight US attempts to block global tax reforms, putting multilateral cooperation at risk.
Global Tax Reform and Its Importance
- UN Tax Convention Proposal: Aims to tax corporations where they operate, preventing profit shifting to tax havens.
- Tax Evasion Impact: Nations lose $492 billion annually, with the Global South suffering most due to weaker public funding.
- Shift from OECD Model: Proposal moves from the "arm’s-length principle" to unitary taxation, ensuring multinationals like Amazon, Google, and Apple pay fair taxes.
Trump’s Opposition and Its Consequences
- US Obstruction at the UN: Trump’s delegate walked out of negotiations, isolating the US.
- Tariff Threats on Allies: Trump targets Canada and the EU for taxing US firms, undermining global fiscal cooperation.
- America’s Diminishing Influence: Despite past control over OECD-led tax talks, 120+ nations are now backing independent UN reforms.
Global Response and the Way Forward
- Countries Rejecting US Pressure: No mass withdrawal followed Trump’s call to boycott negotiations.
- Precedents for Action Without the US: The Cluster Munitions Convention succeeded without US approval, proving global norms can shift.
- Strengthening Global Tax Governance: Nations must unite under the UN tax framework to ensure fair taxation, independent of US influence.
Practice Question
Q. Examine the challenges posed by multinational tax avoidance and evaluate the role of global tax reforms in ensuring fiscal justice. How should developing nations respond to US resistance in tax negotiations?
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