For the first time since 1928, the fundamental rules of international taxation will change. The leaders of global tax reform, under the governance of the OECD, have fulfilled their mandate of setting an overall minimum tax of 15%, agreed to by 136 countries and jurisdictions, in which 90% of global economic activity is exercised. On Oct. 30, 2021, representatives of the OECD will return to the G-20 in Rome to conclude this fiscal agreement.
This global minimum tax constitutes a historic reform, one which modifies the bases of international taxation and marks the course of globalization.
At the same time, leaders will be meeting in Glasgow at COP 26, which is being referred to as the “last chance” conference on climate change. This will be the 26th meeting since COP 1 in Berlin in 1995, in which countries will seek to achieve general consensus on the reduction of greenhouse gases, or GHGs.
However, these two global events are being discussed and negotiated in isolation, without any point of attachment. Even as the global climate crisis is threatening our home, planet Earth, this tax reform does not include an environmental attribution. Scarcity of fresh water, loss of agricultural productivity, desertification of territory, and the rise in sea levels will lead to tens of millions of climate migrants seeking to find a viable living space, either in their own countries or perhaps elsewhere. This has already begun.
New international tax rules, which are likely to mark the coming decades, are emerging and we must try to link them to the efforts being made by all countries to counter the effects of the climate crisis.
The global minimum tax certainly marks a certain success, but one-third of the world’s nations have yet to join the initiative, leaving nearly two billion people excluded from the deal. Several of these countries, including the Philippines, Pakistan, Nigeria, Sri Lanka, Sudan, Yemen, Zimbabwe, Madagascar, Mozambique, Myanmar, Kenya, and Fiji, are already grappling with an environmental emergency, unprecedented in human history. However, we have learned that the objective of 100 billion dollars annually in aid, from rich countries—the main polluters—to poor countries to help them face the climate crisis, will be postponed for another two years.
Negotiating an agreement that correlates the minimum tax with climate change could prove to be a major incentive to these non-signatory countries, to convince them to join this global fiscal agreement. Where tax reform finds its limits, concern for the environment may serve as a persuasive force.
A coordinated initiative likely to bring international taxation in line with the climate crisis could be the allocation of 1% of global minimum tax revenues, estimated at $150 billion per year, devoted to the creation of a Global Fund for Climate Refugees.
In addition, the experience gained in setting a global minimum tax, negotiated and agreed upon in just three years, might well serve as a basis for negotiating a consensual mode of global GHG taxation.
This method of taxation would not require the adhesion of all countries to enter into force. Thus, if a country where the emissions originate does not collect the GHG emissions tax, the polluter’s country of residence would be allowed to do so.
Whatever way it is decided to proceed, it is now vital that all forces come together to curb the effects of the climate crisis, which has reached a critical level. The time to approach our global problems in silos is well and truly over.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Brigitte Alepin is a Canadian tax specialist who has worked in practice for 30 years and is now a professor of taxation at the University of Quebec in Outaouais. She is the co-founder of TaxCOOP, the director of the movie “Fast & Dangerous Race to the Bottom,” and co-writer of the movie “The Price We Pay.” “Fast & Dangerous Race to the Bottom” recently won the Outstanding Achievement award at the Best Shorts Competition 2020 Humanitarian Awards.
Lyne Latulippe is a taxation professor at the University of Sherbrooke in Quebec, Canada. She is the principal researcher at the Chaire en fiscalité et finances publiques de l’Université de Sherbrooke.
Louise Otis is the president of the Administrative Tribunal of the Organization for Economic Co-operation and Development, or OECD. She is also President of the Appeal Court at the Organisation internationale de la francophonie, or IOF. She is a member of the Administrative Tribunal of the European Organisation for the Exploitation of Meteorological Satellites, or EUMETSAT. Otis was appointed by the United Nations Secretary-General to a 5-member panel of independent international experts in charge of redesigning the United Nations System of Administration of Justice. She has created a system of transitional justice for countries affected by armed conflicts and/or environmental disasters.
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