(2nd meeting) Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation - Fourth Session

Hello everyone. Welcome back. I hope everyone enjoyed the lunch.

Now we're gonna continue our discussions for the Framework convention work stream. 1. We before the lunch break we finished or we were done by the discussions of Article 4, in which we get all the requests for intervention. And now we're going to move to the next article, which is Article 5.

Personally, I'm excited to hear your thoughts. Looking forward for your constructive thoughts about how we can move forward with the ticket because it's very critical for us to hear from you how we can best address this so we can come with more enhanced and revised text in August that we can reach a sort of conversion about it.

So this article and the upcoming articles I think will be very exciting for everyone to talk and give thoughts about. Now I hand over to the colleague Daniel to start the discussion. Daniel,

thank you, Chair, and welcome back from lunch. We want to continue with the Article 5 as the chair said. Now in Nairobi, we had quite a number of comments on Article 5.

The main one being that the article was just repeating what the status quo was, what existed, and that really it didn't add anything that much. So there was a need to provide for some level of wedding that covered allocation and implementation. And so we've come out, we've done some reframing and come out for additional language based on Member States requests and the statements that were made that creates a commitment to take action as necessary, including if there's a need to renegotiating tax treaties to implement the agreement. So the new text as we see it basically has that written out for us. So I'll just read it out as you can see on the screen and then we'll have a discussion on it.

So the new rendition, basically, or proposed rendition, let me put that way, is that the state parties agree that all jurisdictions in which value is created, markets are located, revenues are generated or economic activities take place have a right to tax a portion of the income generated from such activities. They shall take such actions as are necessary to ensure a fair allocation of taxing rights among all such jurisdictions, including renegotiating renegotiation of existing tax agreements that are inconsistent with this article. So this is the new proposed read mission for discussion and I would like to open the floor for members to give their comments.

So india, please.

Thank you, Chair.

We appreciate the intent of this article to recognize the principal that jurisdictions in which value is created, markets are located, revenues are generated, or economic activities take place have legitimate taxing rights. Having said that, we have a few concerns in the way the Article is drafted firstly, it relates to reference point of taxing a portion of the income. We are of the view that the phrase tax a portion of the income should be deleted because at this stage there is no Agreed Framework methodology or formula for allocating income or taxing rights amongst jurisdictions and including such a language in the Framework Convention in the absence of any agreed allocation rules may create ambiguity and legal uncertainty. The core value of this Article lies in recognizing the factors or the nexus principles that underpin a fair allocation of taxing rights which is value creation, location of markets, revenue generation and place of economic activities. And we believe that the Article should be incurred in these foundational principles without prejudging the manner or quantum of allocation.

Our second concern is regarding the phrase renegotiation of existing tax agreements and we note that the reference to including renegotiation of existing tax agreements that are inconsistent with this Article it introduces an operational and implementation related obligation. It's been our consistent position that the Framework Convention should remain a high level principle based instrument, while operational aspects, including treaty renegotiation implementation mechanisms should be addressed through protocols or subsequent instruments as may be appropriate. Accordingly, we support retaining this Article in a principle based form focused on recognizing the relevant nexus factors for fair allocation of taxing rights while deleting the wordings which point towards any kind of an allocation methodology and treaty negotiations to future protocols. Thank you Chair.

Thank you, India. Chechnya, please.

Thank you Mr. Cody for giving me the floor. Czechia believes, in line with the previous intervention made by the distinguished delegate of Germany that the Framework Convention should be a Framework Convention. Therefore, the Framework Convention should not create any specific self executing obligations, but should create a framework and rest on high level commitments, allowing signatories to decide how to implement these commitments and whether to become a signatory of any protocol. As regards the first part of the Article 5's text, we have explained our reservations to the text and terms used in our previous written comments regarding the new text of Article 5. It seems to us that the current drafting of the Article is not reflective of the work stream's discussions and we would like to understand why the text was changed after the previous version.

The current drafting states that the existing text agreements should be renegotiated if they are inconsistent with Article 5. This is problematic for us, at least for three reasons. First, the text of the Article uses vague undefined terms such as fair allocation, which makes legal application of the Article difficult and uncertain. We believe that this might prevent many Member States from joining the Framework Convention.

Second, this drafting does not seem to be in line with the purpose of the Frame of Convention to create a framework rather than a specific obligation. Hence, in our view, any substantive legal commitment should be reserved only to Protocols, not to the text of the Framework Convention. As the distinguished delegate from India just mentioned last, this drafting could also raise questions about the Article's application in cases where members decide to become signatories to the Framework Convention, but not of the corresponding Protocols. Thank you very much.

Thank you. Chechia, a quick note. I was going to say this in the morning, but I forgot. But I want to suggest that for those of us who have not had time to look at the Secretary General's report, I think it will good for us to look at the reports and the rationale behind the three options that were provided and the one that was chosen. I'd also recommend I look at the A 237, 8230 and then the terms of reference.

It provides a lot of background for the work we are doing and it fills some of the, should I say some of the questions and some of the things that have cropped up. I think if we look at them, it might give us a very good understanding of it and guide us in our submissions. With that, I would like to call Zambia, please.

Thank you. Chair, Excellencies and distinguished colleagues, I have an honor to speak on behalf of the Africa Group. Firstly, Chair and Colleague and Secretariat, I think. Thank you for the text that has been suggested to us. The suggested test on fair allocation of tax and rights for the Africa Group.

Our proposal is offered in a constructive spirit, fully aligned with the objectives of this Convention and with a clear intention to strengthen, not fragment, the emerging international tax architecture. Therefore, Chair and Delegates at the Africa Group, we have a proposed text that I'll try to read out, then make comments thereafter, just to explain our suggested text. So our paragraph one. We are proposing that State Parties recognize that all jurisdictions in which value is created, markets are located, revenues are generated, users or data allocated, or economic activities are carried out have rights to tax income derived or attributable therefrom. We have three suggested paragraphs.

The second paragraph, if you can indulge me. State Parties agree that the allocation of taxing rights shall reflect the real economic contribution of each relevant jurisdiction, taking into account as appropriate factors mentioned in paragraph one above. And that no State Party shall be denied the right to tax income for the sole reason that such income has been derived from its jurisdiction by a taxpayer without the physical presence in that jurisdiction. The last proposed text for paragraph 3 from the Africa Group reads State Parties shall, amongst others, adopt measures to enhance fair allocation of taxing rights, including through, and we have a number of them a Domestic measures b Appropriate protocols c development and adoption of simplified nexus and allocation rules d coordination of rules and efforts to minimize chances of over taxation and non taxation and the last one interpretation, application and where necessary, renegotiation of the existing tax treaties and related agreements to ensure consistence with the principles set out in this Article. So just to have a highlight, and I'm sure my colleagues also come in to expand further, just try to explain our proposed text.

Obviously, Excellencies, the original Draft rightly affirms an important principle that jurisdictions where value is created, markets are located, revenues are generated, all economic activities takes place have a legitimate interest in taxing income arising from those activities. The Africa Group fully appreciates this premise. However, we believe that the provision as currently framed remains too general to provide legal certainty, operational guidance or effective protection for jurisdictions that have historically been disadvantaged by the existing nexus and profit allocation rules. Our suggested draft therefore seeks to clarify, refine and operationalize this shared principle. So for paragraph one, Paragraph one articulates a clear general principle, the one that we've proposed.

It recognizes that not only value creation and economic development activity, but also the location of markets, users and data as relevant connecting factors. It is our firm belief that users, data, location of markets and economic activities are very relevant economic connecting factors. Obviously this, from our perspective and what we've seen, this reflects the realities of modern, highly digitalized and and automated business models and ensure that the Convention remains forward looking and technologically neutral, properly anchoring both Protocol 1 and any relevant protocol as Parties may consider necessary in future. Secondly, Our proposed paragraph 2 introduces an allocation standard grounded in real economic contribution. It makes explicit that taxing rights should not be conditioned solely on physical presence.

This is not a radical departure from international practice. Rather it consolidates an evolution already underway in many domestic laws and international discussions. My country Zambia, for instance, we do tax with imposed withholding taxes where there's no physical presence in the country but there's an economic link, normally a payment for purposes of business. So importantly it safeguards the right of jurisdictions to tax income economically linked to them, while leaving flexibility as to the precise methods of allocation. Our third proposed text in terms of paragraph three, this paragraph focuses on implementation and cooperation.

We believe in what we are doing. Implementation in terms of cooperation becomes very key. Therefore, our proposed text in paragraph three recognizes that fair allocation cannot be achieved through principles alone. State Parties are therefore encouraged to adopt a range of measures, including domestic law reforms, appropriate protocols, simplified nexus and allocation rules, and coordinated approaches to minimize both overtaxation and non taxation. The absence of coordination may lead to over taxation or non taxation and therefore we call that this should be key.

The reference to and interpretation, where necessary, renegotiation of existing tax treaties is framed carefully, not as an obligation to dismantle the current treaty network, but as a commitment to ensure coherence with the Convention's principles over time. Chair, your Excellencies and fellow Delegates. This redraft aims to strike a careful balance principled yet practical, ambitious yet flexible, respectful of sovereignty while promoting cooperation. For the Africa Group, fair allocation of taxing right is not an abstract concept. It is central to the domestic resource mobilization, fiscal sustainability and trust in the international tax system.

We look forward to engaging constructively with all delegations to refine this provision and to build a convention that commands both legitimacy and enduring relevance for the foreseeable future. I thank you.

Thank you Norway. Please.

Thank you. Thank you, Mr. Khalid. Norway has some overarching comments to this article as well as some specific comments regarding the last addition that has been made to this recent draft. We continue to believe that the commitments should remain high level and for the reasons explained by India and Czechia just now, and also Germany earlier in our discussion on Article 4. Now, as we have raised before, we believe that some more work is needed with this conceptual baseline for the article, and we understood the text in the former draft on its article to primarily be relevant to when two states taxing rights overlap.

So Norway reiterates that we believe that the concept of fairness needs to be further discussed in this context and we need to have a reasonable balance between the different concepts like source and residents taxing rights. It needs to be reflected as this relates to the economic effects and fairness with regards to taxpayers. Fair allocation of taxing rights must give both states concerned meaningful taxing rights while ensuring tax certainty and protection against double taxation or multiple taxation for taxpayers. It's also important to assure that the allocation of taxing right does not impact business decisions and profitability of businesses negatively. And if we fail to strike the right balance here, we may undermine the overall purpose of this Convention and other protocols here to contribute to domestic revenue mobilization.

With regards to the addition made in the last draft, Norway has some concerns. It seems that the draft article is intended to create an obligation to renegotiate existing tax treaties. In that case, Norway cannot support this addition for several reasons. Firstly, when reading the draft contents here, the extent and Criteria for such an obligation to renegotiate is highly unclear to us. It is not clear to us what guideline is there in the first part that can be understood in the same way by all parties.

Secondly, it's important to us that the parties to bilateral treaties maintain the discretion to consider its needs and requirements in bilateral negotiations. Thirdly, the context of existing bilateral treaties is outside the scope of this treaty. Fourth, although it's not uncommon that an overarching multilateral treaty formulates principles that may guide bilateral treaty negotiations within the same area, it is rather uncommon that a multilateral treaty contains an obligation to renegotiate existing agreements. Furthermore, there are principles of treaty law that guides the relationship between existing and new treaties, and this is also expected to be addressed explicitly in this agreement, for example under Article 15. So this current draft of Article 5 seems to prejudge the outcome of those discussions and further demonstrates the need to start the discussion of these articles sooner rather than later.

We believe that the relationship with existing bilateral treaties should be guided by the established principles of international law on this matter, as well as the guidelines we negotiate together within the scope of this treaty and not by renegotiating the existing treaties that we may have. Therefore, as an alternative to the new direction presented in the last draft, we rather see merit in aligning the text closer with the language from the Sevilla commitment and specifically paragraph 28e, with some adjustments and we have previously put forward a text proposal in the Informal informals in the session in Nairobi, and we are happy to reiterate that proposal as a basis for further discussion, and we do so together with Sweden. Sweden and Norway's proposal is to draft the article in the following manner. The State Parties recognize that every jurisdiction where economic activity occurs and value is created, including inter alia, where markets are located or revenues are generated or accrued, has a right to tax the income generated from such activities in accordance with with national and international laws and policies, unless State Parties have otherwise agreed in the protocols to this Convention or other international treaties. Now, we are aware that this might need some further work, and we are happy to hear comments from others to this proposal, and we will certainly go back and reflect on the proposal also put forward by the Africa Group just now.

But to be clear in our proposal, by the term other international treaties we mean for example, existing bilateral tax treaties and the right to tax flows from fundamental principles of international law. We therefore believe it's important to have a clear reference to international law in this article. In addition to national law, the wording of Those references are drawn from the Sevilla commitment and represent agreed language by the Member states. And we think that on this article it's good to draw from language that we have already agreed on. Thank you.

Thank you. Norway, Israel, please.

Thank you. Chair. The Article 5, the State of Resident is not mentioned in this article.

I thought at the first half of the sentence there is a reference to a portion that India said. I thought the portion was an indication that there is also the state of residence. But at the end of this sentence it says a fair allocation of taxing rights among all such jurisdiction. Here the state of residence is missing and it should be here.

Another thing is regarding the bilateral treaties. I think the renegotiation, I think that this is not something that you put in a high level in a high level convention. Thank you.

Thank you. Israel, Saudi Arabia, please.

Thank you Chair and co lead for presenting this new text. In your efforts as well as the Section Secretariat, I just wanted to echo the comments made by the distinguished delegate of India on the renegotiating of existing tax agreements. And to add to that tax agreement include multilateral agreement and to renegotiate such agreement, it would require those countries or member States to approve such such renegotiation.

And therefore maybe a point of clarification on what would happen to the situation where some of those member States are not party of this convention. The second point I wanted to make is today nothing really prevents renegotiation or termination of a tax agreement. So maybe another point of clarification on why such land language would be included in the frame of convention for it to give such authority. Yeah, I just wanted to ask these two points. Thank you.

Thank you. Russia Federation, please.

Thank you very much, Mr. Chairman. Thank you for giving me the floor.

We had prepared an intervention, a fairly lengthy intervention.

The aim being to comment on this draft. However, we decided to focus on one specific point in this wording because this wording, this language factors in two principled issues. First, it establishes the right of any jurisdiction to tax a portion of the income generated there. And in that sense, on the whole, we support this wording. Now the second portion of this article calls on States to take action to ensure fair allocation among all of these jurisdictions allocation of taxing rights, that is including by renegotiating existing bilateral and multilateral tax agreements.

On this note, I think we need to pay greater attention to how this second part of the article is worded because to some extent it could result in certain contradictions. It could contradict the outcome of the work that we did. And which resulted in the co lead's draft opinion paper.

That's part of Working Group 2's work, specifically paragraph 19 of that Working paper.

But that, I mean is that if a state, if two states have a bilateral relationship and they have no problems regarding taxation rights applicable to those two states, well then saying that tax agreements will need to be renegotiated, that's quite harsh, quite strong language. Therefore we should probably revert to a discussion of this article, of that second part of Article 5. Thank you very much.

Thank you, Russia, Peru, please.

Thank you very much, Chairman.

On Article 5, we believe that the article is an excellent model because it indicates the commitment that States will be signing up to, but it also says how it will be implemented in practice. And we also think therefore that it's high level language in line with what was said in the terms of reference. We think that changing the language and having a reference to existing tax instruments would mean that we would be undermining the opportunity that we have here for States to potentially boost their fiscal income, which ultimately I think is the aim behind the overall Framework Convention, that is to say, to generate more income to allow countries to finance their own sustainable development. And therefore I think the wording as it currently stands should be maintained. We believe it shouldn't be amended and we shouldn't therefore waste the good work that we done in the previous sessions that have led us to this point.

Thank you.

Thank you, Peru. United Kingdom, please.

Thank you. So the UK has previously noted our concerns around the principle that's enshrined in the article that all jurisdictions in which a business generates revenue or has customers should have a right to tax upon portion of that business profit. While we think there is a case for considering greater market allocation of taxing rights over the profit of the largest and most profitable MNEs, particularly those providing digital services. I think we would be very concerned about the Convention recognizing a market based taxing right in such high level generalised terms without clarity on what renegotiation of this principle would mean in practice. So, for example, the current text is not, not clear of the character of the income that is the subject for this article.

Is it business profits? Is it something else? And makes no attempt to reconcile the seemingly competing rights to tax recognized. So we struggle to understand how parties to the Convention could practically be obliged to take such action, including the renegotiation of existing agreements on the basis of a tax. That is as general as is currently outlined in Article 5.

If the Convention is to impose legal obligations on parties, it is essential that both that the States have a clear understanding of what those obligations mean in practice and that there is clarity about the intended relationship between those obligations and existing legal instruments, both treaties and domestic law. As stated previously, we would support as a general approach to the Convention text that the Convention include high level commitments in the form of guiding principles to ensure the widest possible participation. This is something that our colleagues from Germany, from Czechia, others have mentioned already. However, this high level commitment approach cannot be coupled with the Convention seeking to impose obligations on the Parties, as any obligations would lack the necessary clarity and specificity and I think this is consistent with our preference for taking a high level approach to maximise participation. It remains our view that we should be working from the basis of paragraph 28E of the Severe commitment and mirroring this near universally agreed text which will help to maximize participation whilst delivering substantive high level commitments.

Thank you, thank you UK Germany, please.

Thank you Mr. Kohlid for giving me the floor. Germany supports the underlying principle that taxing rights should correspond to genuine economic activity, value creation and participation in markets. This approach enhances fairness and reduces incentives for artificial profit shifting. To promote certainty, we encourage reinforcing the link to internationally recognized criteria such as established or updated nexus rules, transfer pricing principles and treaty based allocation mechanisms. A clearer operational definition of of economic activity and value creation would help ensure consistent interpretation, avoid overlap with existing standards and preserve the integrity of bilateral tax treaties and multilateral agreements.

Guidance on how fair allocation is to be understood would simplify the application of the Article and avoid discrepancies in interpretation. The understanding of what a fair allocation of taxing rights is will, however, differ vastly among the State Parties. In Germany's view, the Convention has to remain a framework instrument and cannot include a commitment to renegotiate existing DTA's or be binding with regard to double taxation agreements that will be negotiated in the future. Instead, negotiations and their content must remain strictly in the discretion of the State Parties. The sovereignty in this process cannot be questioned.

Germany is not willing to commit to renegotiate or terminate DTA's that may prove to be inconsistent with Article 5 of the Framer Convention in its current draft. Despite the fact, and on that I'd like to echo previous speakers, that it is in many regards uncertain what the expectations are in concrete. Not willing to terminate or negotiate existing DTA's unless this is the outcome of bilateral negotiations with the affected country and binding nature of the Framework Convention would furthermore not allowed for the necessary flexibility with regard to changing circumstances or the specifics of the bilateral relationship between contracting states. And finally, in responding to the Colleague's remarks, I would like to add that we can of course keep on sticking and can stick to the Secretariat General Report or previous resolution, and thereby keep on ignoring the fact that no consensus was reached back then on these sources. However, in doing so, we risk ending up with a final product that will likewise lack universal support.

Apart from that, I believe that one of the earlier decisions made was precisely to develop a Framework Convention supplemented by protocols, in order to ensure the broadest possible support from as many Member States as possible. Thank you.

Thank you, Germany, Switzerland.

Thank you, Mr. Kohlid, for revising this provision again and again. We appreciate your efforts in that respect. As an initial remark, I would like to express that we share the sentiment of our distinguished colleague from the Chair, Czech Republic, that we too, we have difficulties to bring the different proposals in line with the discussions we had. So we too, we would welcome to receive some more background on why a proposal is abandoned and why the next one is presented. Regarding the most recent proposal, we have the following remarks to share with you.

Similar to the proposal of October 25 that was discussed in Nairobi, the present draft attributes taxing rights directly to a certain degree, and this attribution could collide with the allocations agreed in existing treaties, and this is also declared by the provision itself, and we therefore have concerns regarding legal certainty. We prefer a commitment to adopt policies for a fair allocation of taxing rights complemented with basic principles over a direct allocation of taxing rights in the Framework Convention itself. Your proposal, Mr. Kohlid, of the 6th of January of this year that was only discussed in the virtual World Stream meetings for followed this approach. The present proposal seems, in addition, also not sufficiently detailed for its purpose. It assigns shared taxing rights for income from economic activities, but it gives no further guidance regarding the portions.

And we see the difficulties in developing a rule detailed enough to be directly applicable and also comprehensive enough to cover all income from economic activities. We therefore do also not ask for the elaboration of such a rule. Instead, we suggest again a commitment to follow certain generally accepted principles when allocating taxing rights, and then to leave it to the involved countries to agree on their interpretation of these principles in another instrument, be it by bilaterally a protocol to the Framework Convention or any other multilateral agreement. Now, regarding the principles for a fair allocation of taxing rights that could be enshrined in the Framework Convention, we think that they should be general enough to leave room for the different policies applied between countries Member States should be in a position to sign the Framework Convention while continuing the treaties that they consider to be fair. At the same time, as an example for such high level principles, the Compromiso de Sevilla seems to enjoy broad support.

Equally suitable language was, in our view, also provided in your proposal of the 6th of January of this year. Another concern regarding the present proposal and also some of the previous proposals proposals is the risk of double taxation. The mentioned criteria for the attribution of taxing rights, they could, depending on their interpretations, overlap. And these overlaps, they do not only exist between source and residence states, but also between, for example, the market jurisdiction, the state from where revenues are generated, or also the jurisdiction where value is created. It is therefore not enough to leave it to the domestic law of the resident state whether and how double taxation is eliminated.

Further coordination is needed in that respect. And in fact, in our view, no rule for the allocation of taxing rights is needed at all. If there is no intention to avoid double taxation, you could just simply let each country tax what it considers to be right and fair. So any commitment for a fair allocation of taxing rights should go hand in hand with also a commitment to avoid double taxation. So, in short, Mr. Kohlid, we think your proposal of January of this year was a constructive one.

We would complement it with a commitment to avoid double taxation. But also we could support the provision proposed by Sweden and Norway. We think this is also something a wording that provides sufficient flexibility for the way forward. Thank you.

Thank you. Switzerland, Mexico, please.

Thank you very much, dear colleague. And thank you colleagues, for the discussions on Article 5. For us, we are in a similar position. We do think the work that's come to draft this language. But I think that for us, maybe taking the language from the basis of what we agreed in Sevilla would be a better way forward, considering that some elements in this paragraph do raise some alarms in my capital, particularly because, as was mentioned before, the taxing right has to be also kind of discussed within domestic law.

And this would also bring me back to what other colleagues mentioned for Article 4, that perhaps all of these discussions would be better suited if we already had some sort of definition or defined agreement on what we want out of Article 15. And that would make it easier at least to put pen to paper on what we want to move forward in a legally binding. I think some of the reasons have been already expanding to. But I think that for my capital also the risk of double taxation is an extreme issue, specifically because the language here, as we have it in Others could be interpreted as broad and then it would then depend on whoever interprets this article to then establish the right to tax. And this could be an unfair practice and that could be an encumbrance to our citizens.

So perhaps we need to have a closer look at this and just to bring back an element that I believe my colleagues in Kenya mentioned. And this ties as well to what we kind of define as the economic activity happening that for us we would still be in favor of including a provision for social protection. As you know, this for us is a. Mexico is a pivotal and very important issue. And we see that this convention could provide a practical guidance on how to ensure that everyone contributes from Social Security. And this could also support those people that work with companies that are not necessarily based on their country where they're generating income, but they can also be protected from unfair tax practices.

So we would strongly encourage having a proper discussion on this. I know that I mentioned in Article 4 that we wanted a link to human rights, but I think that the difference between Article 4 and Article 5 is that if we get Article 5 wrong, then we will be infringing on human rights of our citizens because the Norfair practices would then be hurting their ability to properly trust the system in which they are paying taxes to. So maybe have a discussion on this, but positively looking at what the colleagues from Norway and Sweden put forward on the basis of Sevilla and seeing how we can find a way forward with this article. Thank you.

Thank you, Mexico. Ghana, please.

Thank you. Thank you, Kholid for giving us the floor. Ghana welcomes and strongly supports the statement delivered by Zambia on behalf of the African American Africa Group and adds the following in her national capacity, we support the principles articulated in this article which speak to the heart of fairness equity in the international tax system. We make three comments on the amendments proposed by the Africa Group. First, the amendments proposed by the Africa Group rightly recognizes that all jurisdictions in which value is created, markets are located, revenues are generated, users or data are situated or economic activities are carried out have the right to tax income derived from or attributed to these activities.

This general principle reflects today's economic realities, particularly in an increasingly digitized and integrated global economy, and corrects long standing distortions in the equitable principle of taxation which has disadvantaged developing countries where incomes are largely sourced from. Second, Ghana attaches particular importance to the agreed standard for allocation taxing rights allocation must reflect the real economic contribution of each relevant jurisdiction and must not be contingent solely on physical presence. For Ghana and for most African countries, this is critical. Significant value is generated within our economies through our markets, our uses, data and consumption. Yet taxing rights have too often been denied on the basis of outdated nexus rules.

The amendments proposed by the Africa Group to this Article affirms that no State party shall be precluded from taxing income merely because a taxpayer lacks a physical presence in that State party's jurisdiction. Third, Ghana welcomes the clear commitment to implementation and cooperation. The adoption of an appropriate domestic measures protocols, simplified nexus and allocation rules and coordinated approaches to minimize both overtaxation and non taxation are essential to making these principles effective in practice. Equally important is the commitment to the interpretation, application and where necessary, the renegotiation of existing treaties and related agreements to ensure consistency with this Article. In our view, the provisions represent a decisive step towards restoring balance in allocation of taxing rights, strengthening fiscal sovereignty and enhancing domestic resource mobilization for sustainable development.

Ghana therefore supports the amendment to this article proposed by the Africa Group and calls for its acceptance because its robust and faithful implementation would deliver tangible benefits to all states, particularly developing countries. I thank you,

Thank you Nigeria.

Please thank you for giving me the floor and good day everyone. I thank the Chair Nigeria thank the Chair, the Police and the Secretariat for providing this existing draft that we have here today to discuss on. Nigeria recognizes that this commitment that we have here, that's a commitment on fair allocation of taxing rights in Article 5 is central to the work of the INC and the framework Convention as a whole.

This Article is important not just for developing countries, not just for Africa, but for everyone, especially considering the current way of doing business, considering the current globalization and the current allocation of taxing rights in the global community. Nigerian notes the need for a commitment in Article 5 that is not vague, a commitment that members can hold themselves accounted to even while it is kept at high level. So while we recognize that the commitment should be kept at high level, we also recognize the fact that it must not be vague. It should be a commitment that we can relate with. We can hold ourselves accountable to.

Nigeria notes that the proposal by the African Group recognizes the core challenge or the core issue affecting the fair allocation of taxing rights presently and Nigeria also notes that this proposal by the African Group represents a good way forward and in having a commitment that promotes a shared vision and good basis for negotiating a protocol that will promote fair allocation of taxing rights, especially in negotiating the Protocol 1. In view of this, Nigeria therefore fully support the proposal of the African Group. In addition, Nigeria notes the comments that was made by India especially in respect of the current draft that we have looking at a reference to taxing a portion of of the income and we recognize that we have not agreed yet on what should be taxed. Is it a portion of income? Is it the whole income?

Is it a fraction? So having taxing a portion of the income included in the in the text of a commitment or a text of Article 5 we see may not be high level enough. So we may think if that reference to a portion can be taken away. However, while making such that comment, we still fully support the new text that have been provided by the African group. Thank you.

Thank you. Nigeria, Poland, please.

Thank you. Chair. First of all, I would like to thank you for the preparation of the new proposal of this article 5. We appreciate this a lot.

Nevertheless, I will have some maybe questions and remarks about this article since after the first discussion in Nairobi we have chance today to discuss it for the second time. And I'm afraid I'm a little bit more confused about this text than about the first one we discussed in Nairobi. Especially I do not know exactly what this proposal mean, what is behind the idea behind this proposal. So I think it would be we could facilitate our discussion when we would have kind of explanation what is the interpretation of this article. In fact, because and this moment everyone can read some different stories from this text and it would be much easier to discuss about the principles and the interpretation of this article.

Okay, this is the first remark. I think it would facilitate our discussion. Why maybe first of all, I would start with some general remarks. We are forgotten, I think about the principle we should include in this Convention. We started in the middle with the commitments, but I would like to remind you that the terms of reference first of all recognizes that we need to include in the Convention Convention some principles.

And one of the principle we have to include in the Convention is that Parties, states parties recognize that every Member State has the sovereign right to decide its tax policies and practices while so respecting the sovereignty of other Member States in such matters. This is the element which we must include in the Convention according to the terms of reference. So the legal obligation coming out of this Convention concerning the renegotiation of double tax treaties seems to me not in accordance, not in full accordance with this principle which we which we have stated in the in the terms of reference. That's why we would prefer here to rather have like high level commitments than the legal obligation to renegotiate tax treaties. If these tax treaties are not in accordance with the rule here in the first sentence, especially that this rule is not very Clear enough for me.

It just listed this rule lists some, let's say, factors which are kind of nexuses for the taxation of the business income. I understand and it's okay, we understand that we need to list these factors. But we don't know whether just to be in accordance with these rules, whether we have to be in accordance with only one of these factors. It's the open list like with or at the end or all of them. It's not clear.

That's why we need kind of explanation of the outer what is behind the idea behind this provision. Because then the kind of being in accordance with this rule is not very precise at least. So this is first technical issue and the second one is about allocation.

What is the fair allocation? We do not. We didn't say here what is a fair allocation. We do not.

Because if we want to talk about the allocation principles then we have to recognize that countries has right to tax because they have sovereign right to tax everything what they can, what they want. So I. So we need to recognize whether this first sector sentence refers to the right to tax of the countries within their sovereignty or it is the rule which should be applicable to the international tax treaty when these countries have to limit this right, this sovereign right somehow to reach the fair allocation of the tax increase rights. So we have to be clear that we first talking about. We first talk about the sovereign right to tax and then in the international agreement we need to limit this right somehow to allocate taxation rights.

I think it should be clear from this provision that we are talking about this. And then we need the specific, specific right principles of this allocation to be fair. For me, we need to take into account at least I mean instead of together with referring to these economic issues here, which I can. And this nexuses which we agree with generally we need to focus somehow also on two issues. Because first goal with the.

When we allocate or share the taxation right in the. In the international treaties, the first issue is to avoid double taxation. This is, I think that any allocation which do not have as an objective avoidance of double taxation is not fair. The second issue which we can consider to take into account is whether we want to avoid double non taxation. We have to ask ourselves whether allocation which ends up with double non taxation is fair.

And finally we refer to the fair allocation as far as the economic activities are concerned and to this list of nexuses which we have here in this article which shows when we like meet all the principles of double elimination of double taxation, avoidance of double non taxation, occupation okay, so we can now share our income from the specific economic activity. I think that we should start thinking about this fair allocation of taxing rights in this wider terms, wider picture, not only just to focus on very, very small piece of the, of this cake. So these are my remarks on this. And finally, I would like also echo the concerns of Czech Republic, Norway, uk, Germany, Switzerland. I don't know whether I listed all of them.

And I think that we can also say that very good point for the discussion. Starting point for the discussion is the proposal made by the by Norway and Sweden. So we would like to support this proposal. Thank you very much.

Thank you, Poland, Please.

Thank you. Thank you, Chair. For this new proposal. We, we also are still studying the proposals from Norway and Sweden. So we will definitely come back on that.

But the first thing is that we would like to urge for clarity on how each nexus will be applied. And also we believe that we should have a wording where one situation leads to one nexus being applied. And so without that, we fear that there will be too much lead legal uncertainty and also tax uncertainty, and also risks of double taxation, of double non taxation, as Poland has said, but also Switzerland. And therefore without that, we cannot support this article. And especially the last part that we feel could really put at risk the current balance of the international tax network.

Thank you so much.

Right, thank you, Lazenberg. And a quick one.

Basically what we are doing is it's member states who are coming out with the various ideas and we discuss the ideas and we try and put out what member states have said. So some of the explanations being asked for member states saying that we want this and want it done this way, to actually put in a commentary on each and every one of them will take I don't know how many hours it would take just talking about why somebody says something. So we are discussing amongst ourselves and what we come out with is what we put on paper. So I want us to get that. And that's why when someone says it gives this explanation.

That's why I'm saying, that's why I'm saying this. And so let's just bear that in mind and maybe take notes of the reasons people are giving for why they are saying what, so that when it comes together, we can be able to also react as we are all reacting. Because at the end of the day, what members still say is what we put together for us to discuss. Thank you, Spain, please.

Thank you very much for giving me the floor on Article 5.

We think that it's important to understand the legal implications that would result from this.

We believe that this just just refers to the source of income and States would still preserve the right to set tax policy in line with their own jurisdiction and responsibilities.

We think that all of these issues need to be gone into in further depth and this should be something that is taken up in Article 15 in terms of how it relates to other instruments. Thank you.

Thank you, Spain. Deckino, Netherlands Please

thank you colleagues and thanks to the Secretariat. I would like to take this opportunity to share some observations on the article currently proposed. While we appreciate the effort that has gone into this Draft, we have some concerns regarding both the level of the detail and its potential effect. Firstly, we feel that the Article as currently formulated is not sufficiently high level for inclusion in a Framework Convention of this nature.

In our view, Framework Conventions should provide for broad guiding principles rather than prescriptive rules. The first part of this Article as it stands, functions as an allocation rule which directly overrides existing bilateral tax treaties considering general principles of international law. Specifically, in light of the Vienna Convention on the Law of Treaties, this is unacceptable. We strongly believe that any potential effects on existing agreements must be addressed with the utmost clarity within the Convention itself. Explicit clarification is needed in the operative text to reassure parties that existing bilateral treaties will not automatically be superseded.

A concrete proposal to this effect should be included in the Convention. Many Member States have asked for it. We cannot afford to delay addressing this issue. We also echo the concerns raised by India that the current wording introduces considerable legal uncertainty, and I also have heard others saying this. Furthermore, the obligation to renegotiate tax treaties does not appear as an obligation of effort, but rather as an obligation of result and as currently phrased, extends to all existing bilateral agreements.

Given that the content of such treaties varies depending on the economic relationship between States and the overall negotiated outcomes, it is neither practical nor realistic to expect that almost 3,000 existing bilateral tax treaties could be renegotiated in this manner. Assuming the first Protocol could be used to amend all existing bilateral tax treaties immediately. It is also unacceptable to suggest that as a result, signatories to the Framework Convention are otherwise obliged to sign up to the first early Protocol to fulfill this commitment, this would directly violate what has been agreed upon in the terms of reference that the Protocols are optional and not obligatory. We should not undermine this principle by making it practically inapplicable. It is also not sufficiently clear why this Article now differs so significantly from the text proposed in January during the Work stream meetings, which was as the State Parties endeavor to adopt Policies that achieve a fair allocation of taxing rights among all jurisdictions in which value is created, markets are located, revenue is generated or economic activities take place.

We would also like to reflect on the proposal from Sweden and Norway. This might also be worth considering. We need some time more to reflect on it. If we want this Framework Convention to be a success and to garner the broad support needed to make a meaningful difference for the future of international tax cooperation. We must reconsider this Article in light of the object and the purpose of the Framework Convention.

I therefore urge you carefully to reflect on these concerns and seek a solution that strikes an appropriate balance between ambition and legal certainty. Thank you very much.

Thank you. Netherlands Finland, please.

Thank you. Mr. Kolid.

I agree with many previous speakers that the Framework Convention should include high level commitments. The provisions in the Convention should not entail direct legal obligations for parties, but that would be the purpose of the Protocols to set out those. Accordingly, the term shall needs softening throughout the draft template. In this regard, shall take actions as necessary to ensure fair allocation of taxing rights, including by renegotiating existing tax agreements that are inconsistent with the Article seems very obliging and at the same time very unclear. For example, what other actions would be then expected and how and by whom would it be deemed that an existing tax agreement would indeed be inconsistent with the Article.

In any case, Finland cannot support including any obligation to renegotiate existing tax treaties. In addition, it's problematic that the article includes many concepts that can be interpreted very differently and that are overlapping at as explained by others already. For these reasons, the article requires redrafting. Finland agrees with the proposals to get inspiration from the Sevilla Commitment. And as the proposal made by Norway and Sweden is building on that, Finland supports that proposal.

Finland is looking forward to to working towards outcomes that are broadly supported by diverse groups of member states. Thank you.

Thank you, Finland. Jamaica, please.

Thank you. Thank you. Koh Lead and thank you for the Secretary for the language that has been proposed. While we recognize the importance of keeping the article at a high level, our view of what the Article is trying to do, at the very least is to identify what would constitute what are the elements of fair allocation of taxing rights and inherent in that consideration, we are guided by what is unfair allocation of taxing rights. The current international tax rules, and we have heard it said many times, which are 100 years old, are not serving the majority of countries.

And that is what has brought us here. It has not helped to build our economies. It is a lopsided system and it is an outdated system and there has to be a correction, of course. And so in that regard, co lead we well, before I move on to what our proposal is, I can I have some sympathy with those who have raised the issue of the renegotiation of existing tax agreements because I think that that would cause a lot of uncertainty when I think of my country's own tax treaty network. Most of those treaties were introduced because of the initiative of investors.

And so I think if that is to be a consideration at all, it should be on a bilateral basis. But I think that we have heard what I consider to be good proposals both from the African Union and from Norway. And so our recommendation chair, is that perhaps the compromise language could be found somewhere between those two proposals. Thank you colleague. Thank you.

Jamaica, Denmark, please.

Thank you, Khalid, for giving me the floor. Firstly, I also want to appreciate all the efforts that have been put into this work and for the opportunity to give our remarks on it. Denmark wants to echo the sentiment that has been expressed by different delegations in regard to the obligation of renegotiating existing agreements as expressed by India, Czechia, Norway, Germany, Poland, Finland and others. We do believe that Article 5 is the heart of this convention and the protocols. And as we all know, a good heart is virtual for a functioning and healthy body for us.

It is therefore of key importance that the mechanism we set up in this article is balanced and well functional. When reading the current draft of the article, the there is our opinion and risk that the heart would indeed experience a volume overload by creating an obligation to renegotiate all existing tech treaties. We fear what the effect of such an obligation will be both practical and monitorable for the risk of an overload. We therefore also invite the members of this committee who favor the new drafting to explain how they envision the new mechanism would work without causing such an overload for the proposal from Norway and Sweden. We find it interesting and need more time to find our final position on it.

And with that I will pause for now. Thank you.

Thank you. Denmark, Hungary, please.

Thank you, Khalid. Good afternoon everyone. Since this is the first time I'm taking the floor today, I will stop with some general remarks we have. Generally, we would like to echo previous speakers, the distinguished delegates of Germany and Czechia, among others, in that we prefer to keep the commitments general and high level. To our understanding, the commitments themselves should not impose specific self executing obligations on parties as they should act as anchors for future protocols as basis for the future work and specific provisions to provide basis for the discussions we believe that it is essential to have common understanding and clear definitions on the scope and possible terms of the Framework Convention.

We also agree that discussions on Article 15 are of importance and should take place as soon as possible, as it was remarked in the morning session by many delegations. As for Article 5 itself, as it is a high level commitment, it should be worded as such in the Framework Convention. That said, the current wording reads as a substantive obligation for parties without necessary clarity and specifics on what it is imposing, as it was already remarked by the uk, Poland and other delegations. We also echo the Netherlands on the concerns raised regarding international obligations and tax certainty. To our understanding, the Framework Convention.

Framework Convention's high level commitments serve as anchors to the future protocols. As such, the current wording of Article 5 is too strong and it already imposes substantive obligation beyond the high level commitment. As many delegations remarked before, the obligation to take necessary actions, including the renegotiation of existing tax agreements, is very wide, both from a legal and technical standpoint. We consider this to be an excessive provision that would put a huge administrative and infrastructural burden on tax administrations. Thank you very much.

Thank you. Hungary, Austria, please.

Thank you, Chair. Let me also give some remarks on Article 5. So first of all, I think the different concepts listed here do have a place in the Framework Convention to confirm the international law principle that countries can tax under domestic laws. It's their sovereign right to impose taxes on certain activities. And at the same time, we also appreciate the call by many, many countries, many delegations for rethinking nexus rules, hearing that the existing ones are outdated and rethink this when we negotiate our tax treaties among each other and when we limit the domestic taxing rights that are under our sovereign responsibility.

However, we do share the concerns that Article 5 could be interpreted as a self standing allocation rule and not what we think it should be. We think that Article 5 should rather be a commitment to strive for implementing fair allocation rules, taking into account the different types of nexus through tax treaties through other instruments in the context of international tax cooperation. Furthermore, as already mentioned by several other delegations, we're very concerned about the explicit obligation to renegotiate all of our existing tax treaties because this is not high level in nature and as such does not fit into the Framework Convention. Therefore, we are interested in looking at into the proposal by Norway in Sweden, supported by others. To use language from the Sevilla commitment can be a good starting point and we would like to look into it.

At the same time, I think it is also the proposal by the Africa Group, which unfortunately I was not able to write down everything, but it seems that there are good elements in it. So we should also see if we can accommodate a compromise here.

What the Netherlands mentioned, The proposal from the 6 January draft was already also going into a good direction. So as opposed to what we have at the table now, I think there are some other draftings that we could look into. Finally, last point, we're concerned that as long as we have not discussed Article 15 and how commitments can be fulfilled and who can decide on whether state party fulfills its commitment, any discussion this week around the different commitments has to be preliminary and would also be subject to anything. What we'll discuss later on in, in Article 15 and other articles later in the Convention. Thank you.

Okay, thank you, Austria. And I think we can retreat that. As we mentioned, all the discussions we have are generally indicative. We haven't really put out final text for discussion yet. And so we are still all working together to come out with what we'll put into the final text for discussion.

So all the comments are welcome. As I said at the beginning of the first session, the text is for us to tear apart, analyze, turn it upside down till we get it the right way up where it will meet all our expectations. With that, I'll call United Arab Emirates.

Thank you, Chair. So we agree with others that there is a concern on the legal standing of the current drafting. And we believe that the Framework Convention should not create a legal obligation, but instead be drafted as high level commitments with the application of such commitments to be addressed in protocols. We think that the multiple allocation factors for taxing rights could lead to situations where multiple parties exercise taxing rights simultaneously, which can result in double or multiple taxation which should be avoided. We therefore think there needs to be clarity on what are the expected outcomes and what is meant by some of the terms that are being referenced here.

We also join others with a concern on the obligation being created to renegotiate existing treaties and potentially as a way forward, would it be possible that the proposals put forward by the Africa Group and Norway and Sweden be shared so that we can consider those and maybe if there's any good drafting suggestions there. Thank you.

Okay, thank you. And since there's been a few requests for the AFGHA Group and Sweden, Norway to share their text, so if they can make some arrangement to share their text with Member states for them to also look at, I'm sure we will see how we can facilitate that later. Belgium, please.

Thank you. Thank you, Chair. We would also like to echo fully what the Netherlands and Austria, Czechia, Germany, Norway, uk, Canada and many others said before. We think there is a specific problem also with the fact that we moved from the version on the 6th of January to this version which includes this. Very difficult to understand for us the legal obligation to include renegotiation of existing tax agreements that are inconsistent with this Article.

This part of the, of the Article, it doesn't even, it's not even in line with the Vienna Convention on the Law of the treaty, specifically Article 34, because this says that a state cannot be forced to renegotiate treaties also with third states. And it's not specified in the article that it's only talking about renegotiation of existing tax treaties between states parties of this treaty then of the Framework Convention. So in any case, for us it is unacceptable to have it in this article. In this way, we are fully open to talk about the text proposed by Africa, the African group and specifically the one by Norway and Sweden, because that includes something that will give us more legal certainty. Because the proposal made by Norway, if I recall correctly, adds the qualifier sentence that is also used in the civilian commitment that says to the extent consistent with existing international law policies or existing national policies too.

So for us this is very important. We need to have more legal certainty on how this Article works because it uses very subjective terms still to us, or not defined what is meant by, in which value is created, what is meant by the fair allocation of taxing. Right.

This means this will entail a great risk of inconsistent application. If this is in a treaty and is signed, who will decide what is inconsistent? It's also not in line because if we look at the Vienna Convention, it only talks about incompatibility, not about inconsistency. Also there we don't really know what we are up for. So in the light of that, we really want to call to find a solution and find a text that can be a way forward for everyone.

So I look forward to also receiving the text by both proposals, the Norwegian, Swedish one and the African. Thank you.

Right. Thank you. Bergen, France, please.

Thank you. Mr. Chairman.

the outset, without any repetition, I'd like to say that we fully support the interventions that were made.

The Netherlands, Germany. We won't be repeating what they said at the outset. We also wish to underscore that this Article is fundamental for this Framework Convention. But it is equally fundamental because no one can be against opposed to the principle of fair allocation of taxing rights. The discussion Today and in the months leading up to today did indicate that there can be divergent views about what a fair allocation really is.

That's why we believe that the first part of this article which pertains to the nexus should be the taxation nexus should be as broad as possible, allowing room for states to then agree amongst themselves what is fair and balanced amongst themselves. I do want to specify regarding the portion, the portion that goes to each State, it could create uncertainty and unless you can say that a portion can be equal to zero, it suggests that all of the taxes would be shared, reducing the room for negotiation between States and therefore reducing the room for both States to be satisfied in a bilateral negotiation.

Moving on, we also subscribe to what previous delegations said regarding obligations imposed on States. So we believe they have no place in this Article which should be a high level article, and they should rather come from a protocol or any other relevant instrument which would allow States to implement this, implement all of this, ensuring a fair and equitable allocation.

By definition, through a bilateral negotiation, there would be a fair and equitable allocation. It's impossible to distort this balance to throw it off kilter because it would have been negotiated by two parties. It's bilateral. Therefore here we risk sending parties further away from fair and balanced allocation. Also, we also want to draw your attention to Article 10 which might shed light on other aspects, other articles.

But it's also absolutely vital for the Framework Convention without which cannot be understood without considering its relationship with other agreements or instruments. I thank you.

Thank you France, Republic of Korea, please.

Thank you Kohli for giving me the floor. First of all, thank you, the Colleague and the Secretary for providing the revised draft. Korea, really appreciate it. Before Turning to Article 5, I'd like to make one general comment. Like many other delegates have already said, Korea aligns with other delegations on a point that has been raised consistently throughout our discussions, namely, the Framework Convention should be remain high level.

We align with the comments made by Norway, Germany and many other delegations.

Turning to Article 5, fair allocation of taxing rights. Since many points have already been made by other delegations, I will be short While Korea supports the objective of achieving a fair allocation of taxing rights, the current text raises particular concerns for Korea as it appears to have significant implications, legal implications for the existing international tax free framework. In this regard, Korea considers that several aspects require further clarification and careful consideration. In this regard, we would like to make three specific points as follows. First, Korea has concerns that the use of multiple alternative conducting factors like value creation Market location, revenue generation and the place of economic activities would allow multi jurisdictions to assert taxing rights over the same income, thereby increasing the risk of overlapping claims and double or merged taxation.

So we are concerned about this a lot, just like Switzerland and Norway has already mentioned. Secondly, Korea notes that the current draft introduced the phrase opposition of the income, which was not reflected in the earlier version of the text. Just like many other delegates, including India has mentioned, Korea considers that further clarification is needed as to how such a portion is to be determined in practice absent common principles or limits, particularly in light of the use of the multiple alternative connecting factors, we are concerned that there is a risk of overlapping taxing claims. It could also result in double or multiple taxation. Lastly, Korea is specifically concerned about this last phrase, the renegotiation of existing tax agreements.

Like many delegations have said, including Austria, India, Saudi Arabia, Netherlands and Denmark, we are worried that it would raise significant legal and practical challenges. Given that the tax treaties are carefully negotiated bilateral instruments, such language in the text would undermine treaty stability and create considerable, considerable uncertainty for both state parties and taxpayers. Accordingly, Korea does not support the inclusion of such language in Article 5. Lastly, regarding the two proposals made by Norway and Sweden and African groups, we do not have. Korea does not have the time to study that.

But we are open to those kinds of proposals. Thank you.

Thank you. Korea. We've been sitting for a while. Want to give ourselves a humanitarian break for 10 minutes and then we'll continue. So let's take a 10 minute break and then come back and continue.

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So we have the delegate from Kenya. Please.

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Kenya, please go ahead.

Thank you. Chair taking the lead from what the chair told us today morning that we have moved from the stage of debating to drafting. We align with the submission and draft language presented on behalf of the Africa group by the delegate from Zambia regarding the reference to existing tax treaties, specifically agreements for avoidance of double taxation. We've continually raised the issue of the excessive restrictions placed on taxing rights of developing countries and their ability to mobilize domestic revenue and the fact that existing tax treaties do not reflect the current ways of doing business and that they tend to be be heavily skewed in favor of the taxing rights of resident states. One of the objectives of the Framework Convention is to establish a fair and equitable international tax system to address challenges to strengthening domestic resource mobilization and also to establish a system capable of responding to existing and future tax and tax related challenges.

Existing tax tax treaties are part of the international tax system that we have been tasked to ensure will strengthen domestic resource mobilization. These treaties are based on policies and principles that have now been significantly affected by globalization and digitalization and are long overdue for review and update. Allowing imbalanced and unfair tax treaties to sit alongside this commitment without any kind of recourse or review will perpetuate the challenges faced by developing countries and will go against the objectives of this Framework Convention. In our view, that would be unacceptable. We therefore support the submission made on behalf of the Africa Group that existing tax treaties should be measured against this commitment and the principles embodied in this Framework Convention.

Regarding the draft on the screen we do not support the proposal to restrict the taxing right of the source state to a portion of the income generated from such activities because that is open to misinterpretation and would unduly restrict the taxing rights of such source states. The use of the word such activities also narrows down the taxing right by because it only links the taxing rate to economic activities and removes the link to the other factors such as where markets are located and revenues are generated. We therefore align with the draft submitted on behalf of the Africa Group, which is more broadly worded. We also continue to support the use of strong legally binding language in the Framework Convention to ensure that its objectives are met and principles upheld. Thank you Chair.

Thank you Kenya, Canada, please.

Thank you Mr. Kohlid and appreciate your comments that we are still in the stage of considering what the draft is and we can look at it from all angles and still provide comments. And so in that respect with respect to Article 5, agree with the view that commitments should be high level, consistent with our view in respect of Article 4. The same is true for Article 5. We agree with comments made by a number of previous delegates in that respect, India, Czechia, Germany and others. We also agree with the way that this article was framed by Norway and thought they came in early and quite eloquently set out a number of the issues this article.

I think since the START has been a challenge and continues to be a challenge. And I think despite the fact that we've had a number of discussions on on this article, I think there was a large degree of concern and surprise among many that this was the latest draft. And I share the view of others that it's not clear to us exactly where this came from based on discussions that were undertaken in the intercessional meetings. I think there are two general aspects to this article. The first being setting out very generally the nexus basis on which states may choose to tax and then followed by the language that we agree with many others, the specific language on shall take action that is problematic.

From our perspective, there seems to be a bit of a strange link between the nexus and the action. The nexus, as was said by, I think it was the delegate from Poland, if I remember correctly, it seems to be stating what a sovereign state can already do. They can tax on whatever basis they choose. It's then how do you link that to what is an agreed allocation? We think that starting as a basis with the Sevilla commitment and a draft along the lines suggested by Norway and Sweden would be a good place to start to try to achieve broad consensus.

We note that in terms of stating the various potential nexuses, this goes beyond what has been previously agreed is very general in nature, suggesting that in any circumstance any or all of these factors may be appropriate. I think in some cases, and in particular looking at where markets are located, I think that it may be more a subset of some economic activity that takes place with digitalization of the market, where it may be more appropriate to look at that and maybe not as a more general principle with respect to the shall take such actions. Here I think we see significant legal uncertainty both with respect to what is the standard set out in this Article. Who would make a determination that it's not a fair allocation and how would it be applied? I think bilateral treaties are typically concluded on the basis of bilateral considerations and situations and have been deemed by both parties to be fair.

And therefore that is why they're signed and why they still remain in effect. And so we have significant concerns about the legal uncertainty that would be brought in by the inclusion of the second part of this sentence. In general, we believe that it should not be, as Germany says, self executing commitments, that that is the reason for having protocols. I share the view of others that we need to ensure that we're consistent with international law principles. Here again a call for a discussion of Article 15 and the relationship of of this agreement with other existing agreements.

I think would be extremely helpful and and valuable in terms of taking us forward. Thank you. All right. Thank you, Canada. Morocco.

Thank you Mr. Chair, for giving me the floor at the outset. I would like to say that we are all in agreement that this draft has some shortcomings, such as the reference to a portion of the income. Also the last part, which talks about the renegotiation of existing agreements.

As we said, we feel that there are some shortcomings regarding this article. We have listened to the proposal of the African group delivered by Zambia.

And we feel that this is a good proposal and constitutes a good basis for discussion and for consensus.

For example, this proposal refers to the imbalances in the current in the existing tax system and the necessary solutions to overcome these imbalances.

That the right to tax needs to be shared in a just and fair way.

The proposal of the African group also indicates that we must take into account the interests of all parties and that we must not over tax or undertax.

Therefore, we reiterate that we support this proposal and we find it to be a good basis for future work to find a consensus based draft. Thank you.

Thank you, Morocco. Lisosa, please.

Thank you. Chair.

The existing paragraph or article as it is on the board is not so helpful to us as Lesotho. And that is why we subscribe to the new proposal by the African group. And if you allow me, Chair, it does three things. One, paragraph one of that states the new NESAAS rule. Paragraph two illustrates what fair allocation of Texan rights is all about, which I think to me should explain or deal with the concern that a lot of Member States have had had insofar as to try to say what is fair.

So I think what paragraph two does is to indicate as to what will come closer to fair taxing rights. And then paragraph three gives details in terms of how we go about allocating the taxing rights. So it gives practical ways in dealing with that. The additional comments that we want to raise as Lesotho issues is that we have agreed that protocols are going to be optional and that to us says that we should be able to implement the Framework Convention nonetheless. In other words, if we don't want to sign to a protection protocol, we should still be able to implement the Framework Convention.

So the Framework Convention should have sufficient details to allow Member States who do not want to subscribe to a protocol to be able to implement that. And we have seen, Chair, that this term, that the Framework Convention Convention must be high level enough. It's becoming more subjective each time and each Day we discuss this issue. So for us, if we allow ourselves to be very high level, we'll end up having all of our time developing protocol after protocol. So where possible we must have sufficient detail to be able to implement that without having resort to a protocol.

Talking to the issue of revising existing treaties, I think we are here because we are all agreeable that the existing treaties are short in some extent they are based on unfair allocation of tax and rights. So so to us we cannot be agreeing to a new standard of allocating taxing rights and want to stick with the existing treaties that are largely unfair. So I think that is the spirit in which from which the issue of renegotiating of tax agreements comes about. Otherwise, Chair, if all that is existing is well, will not be having BERPS issues. So we cannot be saying let's go with the new standard, but maintain the existing treaties that are largely unfair.

So that would be our contribution to the issues. Chair thank you. Thank you. Lisuto. We have Portugal, please.

Thank you very much, Mr. Kaulitz, for giving me the opportunity to share with the Committee the first reaction to this draft of Article 5 that we have on the screens in relation to the first sentence of this article, the sentence that ends on income generated from such activities. We believe that it is more or less the same article that we had the opportunity to comment in Nairobi and also throughout the our written comments. And for that I will not insist on our previous comments. But it's clear that this article goes far than what we had in Nairobi in the sense that it brings a new obligation over the States Parties of the Framework Convention that they should take such actions as are necessary, necessary. And this element brings us to a point that we have an obligation, but we don't know where does it end.

Especially if the objective of these actions are to ensure a fair allocation of taxing rights that we don't have strong elements that allow us to know where we want to land with these actions. This brings a field of uncertainty that we would not like to experiment when signing the Framework Convention as the one that we are negotiating here.

Technically, we have an answer to this point. The Article ends giving us an example of what is a necessary action, stating that it includes the renegotiation of existing tax agreements and the ones that are inconsistent with this Article. But we don't have a strong clue of how we can test this inconsistency. We know that we have to use a comparable that is somewhere in the article. But when we think about the content of our tax Treaties, it becomes blurry what can be considered as consistent or inconsistent.

And this leaves us as an interpreter in a space where we don't want to be, especially when is such a strong obligation there is at stake.

But most crucially, we believe that this obligation to take such actions, including the renegotiation of existing tax treaties, goes on the direction that it's not our preferred. As I've mentioned in the morning, we would prefer the commitments to be high level so that they don't bring strong legally binding language to the Framework Convention. But keep telling us the direction that we want to walk in the context of the Framework Convention through the protocols that we will be negotiating and approving between the parties on the Framework Convention. This was already said by lots of us in this room. I would state, inter alia, that what has been said by India, by Germany, by Norway, by Netherlands, also Dinkiking Kingdom of Netherlands, and especially with respect of the distinctive colleague from Netherlands intervention, I would like to sign that we also have concerns that this kind of language would have a very strange effect on the optionality of protocols.

And we wonder if this is not the objective that is on this black letter drafting. But if it is as such, we certainly would not be able to follow this kind of article. How can we go forward? Well, we already had this afternoon two different alternative proposals of approaches. One presented by the African group, another one by Norway in conjunction with Sweden.

We will take from your words, Kohli, that we will have the opportunity to pay some attention to both these proposals. And I believe that is the correct way forward. It will not be strange to anyone that we probably may find more promise way in the proposal presented by Norway. But that comes from what is our position, principal position in respect of how high level should be these commitments. And that's the reason.

But we want to give and pay attention to both the alternative approaches that were presented here today. Thank you.

Thank you. Senegal, please.

Merci. Thank you very much, Mr. Chairman for giving me the floor.

First of all, we would like to support the proposal of the African group. And we would also like to make some comments on our national capacity. Article 5 on the Fair allocation of taxing rights through a fair taxation of multinational corporations is one of the pillars of this UN Framework Convention. So the terms within it have to be sufficiently explicit to avoid any misinterpretation and to consolidate tax authority. That is why we think that the scope of the provisions should be as broad as possible while indicating the realities of the digital economy.

In addition to this, we should think about the practical way for taxing rights to be appropriately enforced. If we don't have that, then Article 5 would perhaps only be a commitment whose implementation of reality could be problematic. That is why consistency between the Convention, the protocols, the consistency between those two must be ensured so that we can really see the concrete implementation of our goals. Thank you.

Thank you, Senegal. And our interpretation will end by six and we get so.

Okay, let's see. We'll have some housekeeping, but this. Okay, we'll need five minutes for that. So Singapore, please. Go ahead.

For Singapore, please.

Thank you, Chair for the. Thank you, Kholid, for the opportunity to speak. Just three broad comments from Singapore. The first is to echo the sentiments of various Member States earlier that the Framework Convention should keep the commitments to a high level. And two further observations to make.

The first is on the first part of the article, we note that the text cites multiple taxation factors in a way that suggests that they are mutually exclusive. This could heighten uncertainty for taxpayers and result in multiple taxation of the same income, as several Members have pointed out. This uncertainty, we think, is compounded by the issue that what a fair allocation of tax looks like is inherently subjective. So in practice, we note that value creation already doesn't presume the strict need for physical presence. So to ensure broad support for the Convention, perhaps suggestion, like several other members have pointed out, to adopt agreed language in the Surveillance commitment, which calls for taxes to be paid where economic activity occurs and value is created in accordance with national and international laws and policies.

The second observation is on the renegotiation of tax treaties, a point of clarification of whether this refers to both bilateral and multilateral tax agreements. On the former, we note that States already have the flexibility to negotiate and conclude tax agreements based on their needs and circumstances. And perhaps it'd be more appropriate to leave this contracting States to decide what taxation factors to adopt and how taxing rights should be allocated between themselves. Thank you.

Thank you, Singapore, I think. Okay, China can take it in.

Microphone to China, please.

Thank you, colleague. First, I'd like to echo what Switzerland, Poland, UAE have mentioned, the importance of avoiding double taxation. Since Article 5 specifies four elements for allocating taxing rights, the future formulation of specific taxing rights allocation rules in political may give rise to issues of double taxation. While addressing double taxation is key objective and principle of international tax cooperation, therefore, we believe it is essential to explicitly emphasize the need to avoid double taxation and in this article to ensure this receives adequate attention. Second, I'd like to echo what India, Russia and many others have mentioned that we should be cautious about the wording of shall take such actions, including a renegotiation of existing tax agreements that are inconsistent with this Article which seems to entail enforced obligations to States parties.

The first reason is that I think as a multilateral legal instrument, the core function of this Framework Convention is to establish common principles, objectives and a cooperative framework rather than directly regulating the specific bilateral rights and obligations between states parties. The second reason is, as mentioned by others, that it may undermine tax certainty and business environment. Because we all know that businesses rely on the certainty provided by current tax agreements for long term investment decisions. Possibly initiating large scales renegotiations would create legal uncertainty worldwide, potentially discouraging cross border investment and trade. This ruins counter to the Convention's goal of promoting sustainable development.

Thank you. Right. Thank you China. And with that we would have to pause contributions for today interpretation ending in five minutes time. We have a few housekeeping issues we you need to sort out.

So we'll start tomorrow. We'll start with Tanzania and then continue with the member states. They will go to the intergovernmental and then stakeholders.

Before I.

Okay, before I continue, I like Secretary to guess we have a few housekeeping issues. Secretary can address it. Then we'll go on. Thank you.

Thank you, Mr. Koh.

Lead.

Apparently there has been a bit of confusion about seating for the stakeholders. Maybe we should have done this housekeeping this morning, but we thought that we could handle it sort of one on one.

You might have noticed that there are more of you than there are seats.

In the past everyone had a seat. Everyone coming from a stakeholder had a seat with a microphone.

That is not the case here. And so what happens in these circumstances?

We've been informed by DGACM they wanted to do this in Nairobi, but we had enough seats. But there are, what is it, 40 more accredited organizations here than in Nairobi. So there are not enough seats for every civil society organization to have a seat with a microphone. Therefore, stakeholder seats one through eight, which are the last row, should remain empty unless and until someone from the secretariat tells you to take. You ask for the seat, you need to talk to one of the interns.

Tell the intern that you need that you want to take the floor. And they will then direct you to a seat so that we know who is asking for the floor floor. And then once you speak, you need to vacate the seat so that other civil society organizations can also participate in the process. Also, if you have not been assigned a seat, you cannot sit in another organization's seat because that confuses who is asking for the floor. So a few simple rules.

Sit in the seat you've been assigned. If you have not been assigned a seat, take a seat without a microphone, sitting behind someone else if necessary. And then when you have asked for the floor, you will be directed to one of seats one through eight. Those seats should stay empty until someone has directed you to sit in that seat. And hopefully this will all go much smoother tomorrow.

Thank you.

Okay, thank you. And.

Just some quick questions for us to think about overnight.

Now, when we look at our current treaties, a lot of them have been based on residence rules. Coming out with this, it seems we might have some source rules. So the question we should start thinking about is that how would we implement it if, and I'm using the word if, we agree and then we have source rules in addition to resident rules, how will we implement the Framework Convention? Second thing is that we've been talking about Article 15 and how the two agreements will work side by side or with other agreements, but yet we are still scoping. We haven't come out with any agreement yet.

So how do we indicate how they will relate when we haven't outlined the two of them? Which is why we said we'll have that discussion, but we need to make a little more progress before we have that discussion. So these are food for thought as we go home. And I'm sure we'll get some more answers as we go along with that. I'll hand over to the chair.

Thank you, Daniel. And thank you all for your participation today. So we're going to convene tomorrow at 10am on the same room to continue our discussions on Article 5 and resume the the floor. Till then, have good evening everyone and take care and see you tomorrow.