International Tax Reform Briefing Note

Countries lose more than $400 billion annually to tax abuse by multinational enterprises (MNEs) and wealthy individuals. These losses undermine states’ ability to fund essential public services, deepen inequality, and constrain development. Lower-income countries are hardest hit, forfeiting an average of 36% of their public health budgets due to cross-border tax abuse.

Limitations of the OECD Two-Pillar Framework

The OECD’s two-pillar solution attempts to address profit shifting and introduce a global minimum corporate tax. However, it was negotiated largely by high-income countries, lacks transparency, and excludes meaningful participation from much of the Global South.

• Minimal revenue gains: Pillar One and Pillar Two together raise far less than the nearly half-trillion lost annually to abuse.
• Skewed benefits: High-income countries, home to most MNE headquarters, stand to gain the most. Only about 100 companies fall under Pillar One’s scope, and the 15% minimum tax rate is far below global averages.
• Reduced autonomy: Countries that adopt the framework must limit their ability to tax digital services, weakening their fiscal sovereignty.
  Overall, the two-pillar approach adds complexity without delivering meaningful revenue or equity.

The UN Tax Convention: A More Democratic Alternative

Dissatisfaction with the OECD process led the Africa Group at the UN to champion a new UN Framework Convention on International Tax Cooperation. The Convention opens space for all 193 UN member states to negotiate rules on an equal footing. Early protocols focus on digital taxation and dispute resolution—crucial areas for developing countries seeking fairer outcomes.

South Africa’s Role as G20 President

With South Africa presiding over the G20 in 2025, the country has a pivotal opportunity to advance a progressive, Africa-centred agenda on international tax reform. This includes:

• Building consensus within the G20 for support of the UN Tax Convention;
• Collaborating with civil society to expand public debate;
• Advancing global minimum standards for taxing the super-rich, building on momentum from Brazil’s 2024 G20 leadership.

A Call for Fairness and Equality

To secure the revenues needed for sustainable development and the SDGs, South Africa must lead efforts to go beyond the OECD’s limited reforms and champion a democratic, inclusive, and equitable global tax system.