Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation - Second Substantive Session 2025, 1st meeting

Good morning, everyone. Distinguished delegates, dear colleagues, I declare open the second session of the Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Coordination and call its first plenary meeting to order. The Committee will resume its consideration of agenda item 1, entitled Election of Officers. In accordance with General Assembly Resolution 79/235 of 24 December 2024, the Committee shall elect 18 Vice-Chairs and Rapporteur elected on the basis of equitable geographical representation and taking into account gender balance. I have been advised that Mr. Leo Rayan of Bahamas, Vice Chair from the group of Latin America and the Caribbean states, has tendered his resignation. I have received the nomination of Ms. Marlene Parker of Jamaica for the position of Vice Chair. May I take it that the Committee wishes to elect the nominee by acclamation as Vice Chair of the Committee? I hear no objection. It is so decided. On behalf of the Committee, I congratulate the Vice-Chair. The Committee will resume its consideration of agenda item 3, entitled Organizational Matters. Members will recall that by its decision 2, taken on 3 February 2025, the Committee adopted the programme of work for its sessions, on the understanding that it might be revised during the sessions as needed. In this connection, the revised programme of work is contained in document A/AC.298/CRB.14 Rev.1, which has been distributed to delegations via e-delegate and is available on the website. The Committee has thus concluded this stage of its consideration of agenda item 3. The committee will resume its consideration of agenda item four entitled Framework Convention Protocol 1 on Taxation of Income Derived from the Provision of Cross-border Services in an Increasingly Digitalized and Globalized Economy and Protocol 2 on Prevention and Resolution of Tax Disputes. I now open the floor for general statements by delegations. Please press the microphone button if you wish to speak. Delegations wishing to speak on behalf of groups are requested to approach the secretariat to be given priority. As announced in the journal, time limits are four minutes for statements on behalf of groups and three minutes for statements in national capacity. The floor is now open. Distinguished delegate of Denmark, followed by Brazil.

Thank you, Chair, distinguished delegates, colleagues. I have the honour to speak on behalf of the 27 Member States of the European Union. We, the Member States of the European Union, are here because we believe in multilateralism and international cooperation. We believe that dialogue can foster agreement by creating a space for open communication, understanding and mutual respect. During the first session, we have been listening carefully to the Member States and stakeholders which have voiced concerns. We hope that our engagement shows that we are willing to discuss these concerns and to explore ways on how to address tax challenges that are related to new business models and global development. Our work during the first sessions focused on the framework convention, which should include commitments to achieve its objectives. In this regard, like many others in the room, we favor high-level commitments which provide for flexibility and will increase the likelihood of broad support for the framework convention. We found it useful to start considering how the commitments could be reflected in the text. And we thank the Chair, Co-Lead and Secretariat for facilitating this exercise. The INC also discussed whether a new commitment on exchange of tax information should be included in the Framework Convention. We would like to reiterate that we fully subscribe to the importance of tax transparency to ensure effective taxation. To this end, an extensive international framework is already in place. The INC should conduct its work in line with paragraph 22 of the Terms of Reference. Moreover, we would like to stress that the exchanges of tax information between Member States must navigate the delicate balance between the need for tax transparency and the need for confidentiality and data safeguards. In the context of the INC's work, we move to the second session where we will focus on the two early protocols. We welcome an open discussion to identify current challenges related to the protocols and explore possible solutions with respect to tax sovereignty of each member state. Concerning the first early protocol on taxation of income derived from cross-border services as a starting point, we recognise that the digitalisation of the economy has changed economic structures and the way services are being provided. We would like to keep an open mind while discussing possible solutions regarding the first early protocol. We believe that there is no size fits all approach and any result should consider needs and economic realities of each Member State. To facilitate this process for all involved parties, we think it is essential to thoroughly understand the economic impacts of these possible solutions, building on the extensive efforts already made. Concerning the second early protocol on prevention and resolution of tax disputes, we support international approaches that facilitate bilateral or multilateral resolution of cross-border tax disputes and prevent them at an early stage. The development of this protocol should encompass principles of clarity, efficiency, and legal certainty. We believe that such a protocol could have an added value in supplementing existing international frameworks. We favor optionality, which would allow states to apply different dispute resolution mechanisms based on their individual circumstances, needs and capacities. Mr. Chair, distinguished delegates, colleagues, we, the member states of the European Union, are ready to discuss current tax related challenges at international level and to advance the work on the two early protocols. Thank you.

Thank you, distinguished delegate of Brazil, followed by Netherlands.

Thank you, Chair. The Kingdom of the Netherlands aligns itself with the statement delivered by Denmark on behalf of the EU Member States. The Netherlands hopes this process can contribute to an inclusive, effective and fair international tax cooperation. The practical relevance of the Framework Convention and its protocols depends on the signature of a significant number of Member States. Trying to find consensus is therefore in the primary interest of all of us. In our view, the first early protocol on cross-border services could only have practical relevance if a significant part of cross-border trade in services is covered. The scope might also cover different approaches than the reallocation of taxing rights. because broadening the scope of the protocols and increase the optionality within them will contribute to a result that can receive more support. In order to achieve consensus on controversial topics, we can all reap the benefits of endeavours to this end in other forums. The Kingdom of the Netherlands also fully endorses any efforts that contribute to tax certainty and the prevention and resolution of tax disputes. We should therefore not rule out any possibilities to achieve this. To conclude, the Kingdom of the Netherlands remains committed to working collaboratively and constructively toward a truly inclusive and widely supported outcome. We believe that with continued dialogue, mutual understanding, and a willingness to accommodate diverse perspectives, this committee can shape a framework convention and accompanying protocols that deliver real value to the international community. Thank you.

Thank you. Distinguished delegate of Brazil, followed by Chile.

Mr. Chair, distinguished delegates, Brazil is pleased to participate in the second session of the Intergovernmental Negotiating Committee of the UN Framework Convention on International Tax Cooperation. will engage constructively in the development of the first protocol. The taxation of cross-border services is one of the most pressing challenges in international tax cooperation in the context of an increasingly digital and service-based economy. It is essential to ensure that income from services can be taxed in the market of consumption or utilization, even if the provider is not physically present. Current standards disproportionately favor residents of jurisdictions, thus undermining the fiscal capacity of developing countries. Therefore, the principle of taxation at source is crucial to ensuring a fair and sustainable international tax system. It upholds a nation's inherent right to tax economic value within its borders, regardless of physical presence. It also reflects the importance of leveling the playing field for fair and effective domestic resource mobilization. While acknowledging the diversity of national approaches, Brazil emphasizes that gross basis taxation remains the most viable solution to ensure that source jurisdictions can tax services consumed or used within their territory. Gross basis withholding offers a simple, efficient, predictable, and administrable approach suitable for countries with limited fiscal and enforcement capacity, thus avoiding the complexities of determining net income across borders. We should design tax rules that are normatively sound, enforceable, and tailored to the realities of countries with limited resources. Capacity building and technical assistance will be essential for successful implementation, as will the inclusion of model normative language. We should consider the adoption of the United Nations model, which recognizes source taxation rights on fees for technical services. Finally, international tax cooperation should be based on minimal standards for countries to retain the ability to adopt brought the rules in line with their development strategies. Likewise, fairness in the allocation of taxing rights, progressivity, and support for developing countries' fiscal capacities must guide this process. We look forward to working with all delegations to craft a protocol that is balanced, operational, and responsive to the structural challenges faced by developing countries. Thank you.

Thank you. The thing is, the delegate of Chile followed by Norway.

Thank you very much, Chairman. We'd like to thank the Bureau and the co-leads for the work they've undertaken and for opening up this space for substantive discussions on these protocols. Protocol one, for Chile, it is a priority that the treatment of cross-border services reflect the transformation of our economies. The expansion of trade and digital services, which are offshored has made clear that there are limitations in the rules exclusively based on physical presence. That means in many instances that there are tax bases which do not actually reflect the value added in our countries. Our position is that the convention should enable modern nexus criteria and assignation of profits, recognizing the economic, substantive economic links between the lender and the market and the provision, the provider and the market, excuse me, and strengthening the capacity of states, particularly developing states, to excise their tax rights without generating excessive administrative burdens. Protocol 2, CILo values the clear procedures here to prevent and resolve tax disputes. An effective tax, an effective architecture in this area doesn't just offer legal certainty and avoid double taxation or double non-taxation. It also bolsters trust between administrations and promotes long-term cooperation. In our view, these mechanisms should guarantee a level playing field for all parties, ensuring that there is transparency in proceedings and allowing all states to fully participate with support to develop their technical capacity when necessary. On both matters, we highlight the importance of taking advantage of diagnostics and tools generated in various foras and, uh, forums and levels of cooperation, integrating lessons learned so that the convention can be built on a solid framework and adapted to the reality of each of our countries. Chile reiterates its readiness to work constructively so that these protocols can deliver our aspirations in terms of effective commitments oriented towards more fair, transparent and inclusive taxation at international level. Thank you.

Thank you. Thank you, delegate of Norway, followed by the United Kingdom.

Thank you. Thank you so much, Chair. Distinguished colleagues. Norway is pleased to continue its active engagement in this important process as we enter the second substantial session. We would like to thank the Chair, the co-leads and the secretariat for the leadership in guiding the discussions in the first substantial session and the work streams, and for continuing their leadership in this session as well. We look forward to our deliberations this week on the two early protocols, on the taxation of cross-border services, and on the resolution of tax disputes. Chair, the UN's convening power should be leveraged to forge widely supported and effective solutions. In doing so, we can raise global ambition on tax, strengthen capacity building, and ensure inclusive representation, as well as support the fulfillment of the Sustainable Development Goals. For both protocols, it is essential that our further deliberations are grounded in a robust analytical framework. This will maximize participation and ensure that we effectively address the objectives of this process. Furthermore, tackling tax evasion and avoidance and other harmful tax practices, which severely impact all countries, requires strong political will and constructive engagement from all stakeholders. Building our discussions of fair allocation of taxing rights of income from cross-border services on well-documented economic principles will create a shared understanding of both the issues at hand and the implications of possible solutions. Ensuring that these principles reflect the diversity of all members in all stages of development will be essential for building the broad agreement needed for the protocol to be widely implemented. Chair, there are a wide range of possible measures to enhance dispute prevention and resolution. Therefore, the work going forward should analyze how the protocol can add value to various existing measures in this regard. We would like to once again stress that inclusive cooperation means engaging all relevant actors, civil society, the private sector, academia, and the media. Their perspective strengthen our deliberations and outcomes. We are committed to engaging in the negotiations ahead and working closely with all delegations to develop a strong and inclusive framework convention that serves the interest of all. Thank you.

Thank you. Distinguished delegate of United Kingdom followed by Honduras.

Chair, distinguished delegates, The UK looks forward to the discussions this week on the two early protocols to the framework convention, and we thank all the participants in the meetings of the work streams for their work in producing the issues notes for this session. On the first protocol, on taxation of cross-border services, the UK believes that it is important that the committee sets out clearly the overall objective of the protocol, the specific issues related to taxation of cross-border services that the protocol would be aiming to address, and clear and justifiable principles against which proposed solutions should be assessed. We also reiterate the need to undertake economic analysis in order to assess the potential wider impacts of policy options, such as any effects on the trade in cross-border services and the broader consequences, for instance, on growth and development. should involve obtaining input from a wide range of sources, including the business sector. We believe that a flexible approach is needed to accommodate diverse economies and business practices that can change over time. Our view is that there are significant issues with taxing income from services on a gross basis, and that the committee could also consider how countries can build capacity to effectively implement net taxation on income from services performed there. On the second protocol, The UK fully supports multilateral efforts to develop and improve mechanisms to prevent and resolve cross-border tax disputes, as that is a very important element in achieving international tax co-operation. We believe that the committee could valuably focus discussions on strengthening and co-ordinating the existing legal frameworks. That could include consideration of how to build capacity to apply measures that prevent and resolve cross-border tax disputes. ensuring that the existing frameworks function as effectively as possible. We support mandatory up-binding arbitration as a useful tool in helping to resolve disputes. However, we recognise that this is not always possible and so would also support work by the Committee on other dispute resolution measures. We also emphasise the importance of engaging business and taxpayer communities in these discussions as key stakeholders. We remain committed to constructive engagement during this session on the issues arising from the work on the two early protocols. Thank you.

Thank you. Distinguished delegate of Honduras, followed by Liechtenstein.

Chair, distinguished.

Delegates. On this, we reiterate our steadfast commitment to strengthening international tax cooperation, which should be really inclusive, equitable and effective, allowing all of our developing countries to have fair norms and effective mechanisms for the mobilizing of domestic resources, which are vital conditions to meet the 2030 agenda, as well as all the SDGs. We reiterate our commitment to international tax cooperation, guaranteeing fair taxation, allowing all countries, particularly developing nations, to have sufficient income to finance their national priorities and meet their development goals. For Honduras, this convention is a historic opportunity to make sure that we have balanced, inclusive, and legitimate international tax norms reflecting the realities and capacities of all jurisdictions without imposing disproportionate burdens on smaller tax tax jurisdictions. We highlight the importance of both protocols under negotiation. The one on cross-border services and the digital economy is of particular importance for Honduras as it recognizes the structural transformation of economies and the need to have clear norms about tax allocation and not generating excessive burdens. This is key to ensure that developing countries can participate in an effective measure in taxation deriving from digital services and activities. In addition, the Protocol on the Prevention and Resolution of Tax Disputes provides procedural clarity and legal certainties that all differences can be effectively resolved. We'd highlight that many developing countries do not have robust mechanisms which are clearly defined for settling tax disputes, which can curtail their capacity to effectively defend their positions in international disputes. Because of that, this text should take into account these asymmetries. and make sure that processes are transparent, accessible, and adapted to the capacities of the institutions of all jurisdictions. We believe that fair taxation and balanced protocols need to have not just technical aspects, but also they need to take into account the sovereignty and the sustainability of public finances. We reiterate our readiness to work actively and constructively with all member states to reach a consensus-based text and achieving truly just tax cooperation under the whole market United Nations. I thank you.

Thank you, distinguished delegate of Liechtenstein, followed by India.

Chair, distinguished delegates, Liechtenstein thanks the secretariat and the co-leads for their work in drafting the issues notes and welcomes the opportunity to provide input. We consider the development of the framework convention to be a valuable step towards enhancing international tax cooperation, and we remain committed to the work ahead. With regard to the two early protocols, we have the following general remarks. Regarding the first protocol, the work stream has facilitated constructive discussions on different approaches to nexus, scope, and the manner of taxation for cross-border services in an increasingly digitalized and globalized economy. We recognize the challenges raised by the increased ability to provide services remotely, and we believe that this issue should be addressed by relying on well-established basic principles of international taxation, such as the arm's length principle. With regard to the second protocol on the prevention and resolution of tax disputes, we support the development of a flexible and balanced mechanism that builds on and complements existing tools. It is important that the scope of this protocol is clearly defined and that its interaction with the framework convention as well as with existing dispute resolution instruments is well understood. From our perspective, the second protocol should focus solely on tax disputes that arise in a cross-border context due to different interpretations or applications of tax rules that have been agreed upon between the respective contracting states. Applying the dispute resolution mechanisms of a multilateral convention to domestic cases seems to contradict the principle of tax sovereignty. Furthermore, we see merit in the opt-in and opt-out approach outlined in the issues note, and such a mechanism enables member states to select the arrangements that best align with their existing legal framework. Thank you very much for taking our considerations into account regarding the upcoming work, and we will look forward to constructively to constructive discussions during the session. Thank you.

Thank you. Distinguished delegate of India, followed by United Arab Emirates.

Thank you, Chair. Distinguished delegates, a very good morning to all. As we continue the important work entrusted to this committee, it is worth recalling that our collective mandate is not merely to debate principles, but to develop concrete, implementable solutions. The terms of reference adopted in February and the subsequent deliberations in the organizational session have set out with clarity the two subjects for early protocols. In the intervening months, our discussions within the two work streams have been candid, rich, and informative. They have demonstrated a shared commitment towards achieving a fairer and more inclusive international tax system. Through this process, it has become increasingly evident that the path to meaningful reform must recognize the various asymmetries in capacity amongst countries. Many developing countries have reiterated the real challenges they face, whether in terms of limited data availability, resource constraints, or even the difficulties of translating complex international standards into domestic legislation. As we deliberate on the possible design options, it is imperative that we avoid solutions that are merely theoretical or that disregard the lived realities of administration and enforcement on the ground. Equally, we must guard against proposals that while appealing in their simplicity, falls short of delivering a credible and balanced allocation of taxing rights. It is also important to acknowledge that while international cooperation can provide a common framework, each country retains sovereign choices over taxation policies. We must strive to build a system that allows sufficient flexibility to accommodate diverse domestic circumstances while preserving the core objectives of fairness and certainty. India believes that these early protocols represent an opportunity to set the tone for this process, to show that inclusive dialogue can lead to substantive outcomes anchored in consensus and practicality. As we move forward, India remains committed to engaging constructively and transparently. We will continue to contribute actively to ensure that the solutions we craft are robust, equitable, and capable of addressing the concerns expressed by all stakeholders, especially developing countries. Thank you.

Thank you. His Excellency the Director General of the United Arab Emirates, followed by Korea.

Mr. Chair, we would like to express our deep appreciation to the Chair and Secretariat for their commitment and dedication in developing the first and second protocol under the United Nations Framework Convention on International Tax Cooperation. We agree with many in this room that the current international tax architecture has challenges and gaps that have contributed to global inequitable growth. We therefore recognize the critical importance of this initiative in enhancing inclusive global tax cooperation and promoting a fair and equitable global tax system. The proposed framework has the potential to address significant challenges in international taxation and foster greater collaboration among nations. In regards to the first protocol for the taxation of cross-border services, we are supportive of the work being performed in relation to the unique challenges presented in addressing such taxation in light of the digital economy and increased global mobility of people. Whilst we understand the support and requirement of simplicity in taxation. We are strongly of the belief that any outcomes agreed should be guided by the principle of tax neutrality and that taxation on a gross basis results in economic distortive economics, which can undermine economic growth and result in tax revenues that economic activity supports. Furthermore, the solutions agreed for the first protocol should be complementary and compatible with international model tax treaties to ensure that there is not an adverse impact on the facilitation of cross-border trade and investment, which also supports economic activity in both developed, but most importantly, in developing countries. With respect to the second protocol and dispute prevention and resolutions, we are hugely supportive of the need to prevent and resolve tax disputes in order to minimize the instances of double taxation and its resultant impact on tax collections and revenue. We should stress the need that solutions agreed as part of this protocol should be bilateral in nature and compatible with international model tax treaties. Furthermore, whilst we fully acknowledge the resource constraints faced by developing countries' tax administrations, We would restate the importance of domestic resource mobilizations in supporting disputes, prevention, and resolution, as well as reemphasizing the available methods of transfer pricing simplification, for example, low value adding services safe harbor, and the United Nations practical manual on transfer pricing, which would allow a more efficient uses of tax administration resources. Mr. Chair, we look forward to the further discussions in both protocols to address our concerns and strengthen international tax cooperation. Thank you.

Thank you. Thank you, delegate of Korea, followed by Colombia.

Thank you, Chair. I would like to express my sincere appreciation to the Secretariat. colleagues and all member states for the continuous efforts and active engagement. I hope this session will serve as the constructive step in advancing the discussions. First, regarding the taxation of income derived from the provision of cross-border services, developing international tax system in line with the changing environment is necessary to achieve fairness in taxation. However, I believe that any development of new rules should be preceded by careful analysis. I think that a detailed examination of factors such as service sectors where remote delivery is predominant and the relative market contribution of supply and demand will help establish standards that more accurately reflect economic realities. Moreover, discussions on the manner of taxation should take place only after such analysis is completed and agreement on taxing nexus is reached. In particular, these discussions should carefully consider the potential negative effects of gross-based taxation, such as market distortions and impediments to cross-border transactions, as well as the administrative feasibility of a debt-based approach. Next, I would like to address the second early protocol, the prevention and resolution of tax disputes. I support the broad application of mechanisms including to potential double taxation arising from future protocols while respecting each jurisdiction's sovereignty over domestic disputes. Moreover, providing flexibility through opt-out provisions can facilitate wider adoption of the protocol among member states while accommodating a broader range of effective mechanisms. Beyond mechanism development, the protocol should also focus on capacity building for member states, which will enhance the effectiveness of both new and existing mechanisms. In closing, I hope this session will serve as an opportunity for sharing diverse views and mutual understanding among member states. Thank you.

Thank you. Thank you, delegate of Colombia, followed by China.

Thank you very much, Chairman. We'd like to thank the Chair. Secretariat and all delegates for the intensive work and efforts which have gone in developing this framework convention and the two early protocols. Colombia welcomes this historic and valuable opportunity to garner consensus in important themes, allowing us to strengthen the global tax architecture as a source of significant financing for our countries which are affected by global structures which can lead to the erosion of the tax bases of our countries. Colombia reiterates its commitment to building international tax systems which are genuinely inclusive and equitable, ensuring that all countries, without distinction of the level of their development, can have the ability to protect their tax bases and to participate equally in the building of a global tax architecture. In a world which is deeply marked by digitalization and globalization, Fair taxation of cross-border services is no longer a mere aspiration; it is an urgent need. Current rules serve different economic realities, and now we must have to deal with business models which involve the provision of services at local markets. Colombia believes that the time has come to further our work on digital economies and cross-border services with particular attention for emerging economies and countries which are importers of services. This extension will not only protect national tax bases, it will also avoid the erosion of tax bases in countries of origin and strengthen the mobilization of domestic resources, which is key for sustainable development. Due to this, we believe it is vital that the protocol on taxation for cross-border services reflect the diversity of national legislation, recognising the legitimate aspiration of developing nations to safeguard their tax resources. Following this, we believe that annex rules are a significant opportunity and we believe that a gross basis would be more effective and less burdensome. We're therefore ready to continue to work on the proposals which have been presented. However, turning to Protocol 2, we support prevention and resolution mechanisms for disputes which are, these need to be accessible to all developing countries, recognizing equity as vital for tax authorities. and we need to avoid the disproportionate imposition of arbitration or other mechanisms. International tax disputes often are bereft of effective resolution mechanisms. This early protocol could provide multilateral solutions which are effective in addressing these challenges facing us at bilateral level. We also recognize that differences between developed and developing nations for capacity building, legal frameworks and priorities cannot be overlooked. Doing so would forego equality in outcomes and it would prevent countries from best using these mechanisms, especially the countries that need this the most. These early protocols, we think, should not be limited to just one jurisdiction. Unilateral measures is a problem which could lead to new problems eroding tax bases for local taxpayers. Colombia reiterates its commitment to continue contributing to this work so that we can attain the principal objectives of the convention and protocols. We urge all states to continue to actively participate in these working groups and work streams so that we can have equitable, transparent, and inclusive solutions. which need, most of all, to be efficient and action-oriented so that we can meet the goals of all states. Thank you.

Distinguished delegate of China.

Distinguished Chair, distinguished delegates, colleagues, good morning. We support strengthening international tax cooperation within the UN framework and jointly studying tax issues of common concern to all countries. We commend the efforts and progress made by the various work streams to date, which have laid an important foundation for future work. Regarding Protocol 1, we believe that discussions on the taxation of cross-border services should focus on three points. First, ensuring sufficient inclusiveness. This involves thoroughly listening to the opinions of all stakeholders, respecting and considering the needs of countries at different stages of development, striving to bridge differences as much as possible, and reaching a result that is acceptable to all countries. Second, we should focus on properly coordinating with existing rules. Many countries have established domestic tax systems based on current international tax rules and signed bilateral tax treaties, and they wish to maintain a certain level of stability in their domestic tax systems. Therefore, discussions on the taxation of cross-border services should fully consider compatibility and transition issues in relation to existing international rules. Third, attention should be given to the impact on cross-border economic activities. If new rules are to be established, they should be based on a solid theoretical foundation, and a unified policy rationale, avoiding the creation of convoluted rules that could lead to double taxation or excessive taxation, therefore hindering normal cross-border investment and trade activities. Regarding Protocol 2, we support focusing on the prevention and resolution of cross-border tax disputes under the Framework Convention and its protocols, and support the optionality design, which allows member states to choose which relevant instruments to apply, thereby enhancing the flexibility and participation of the protocol. We will continue to actively participate in the discussions in relation to the Framework Convention and protocols, and contribute to the construction of a stable international tax rules system and enabling environment. Thank you for your attention.

Thank you.

Thank you. Israel thanks the Chair and the heads of the working streams for their work and looks forward to the discussions this week. We agree that international tax systems should address the complexities of the modern era while keeping in mind the diverse requirements of all nations. Throughout the past week, the concept of value creation has been repeatedly referenced as a core principle for the allocation of taxing rights. In this context, we wish to emphasize the critical importance of ensuring that our efforts to refine the tax system do not inadvertently suppress the very factors that generate value and encourage business growth. We therefore strongly support the inclusion of a thorough economic analysis as a basis for our discussions for both the Framework Convention and the Protocols. A clear economic rationale will be critical to support informed policy making and to enhance the prospect of widespread adoption by member states. To achieve a cohesive international tax landscape while minimizing the complexity of the international tax system, we believe the only way is by working towards a consensual agreement. We also think that disregarding work done in other forums might cause additional uncertainty for both governments and the private sector. By building on these existing efforts, we can improve the quality of our work and accelerate progress. At last, we strongly advocate that any protocol of the framework convention, including protocol regarding dispute resolution, should remain optional. Thank you.

Thank you. Singapore.

Thank you, Mr. Chair. We would like to first thank you, the co-leads for the two work streams and the secretariat for facilitating the work streams meetings and preparing the issue notes. Singapore is committed to working constructively with the other member states and stakeholders to strengthen international tax rules. On the taxation of cross-border services, we support approaches that promote tax certainty and encourage investment, innovation, and trade. We believe that nexus rules of taxation should be clear and predictable and administratively efficient. A principled and rule-based approach remains essential. Value creation by service providers through substantive economic activities involving functions, assets and risks should continue to underpin the allocation of taxing rights. We should be mindful that successful digitalized services are built upon significant R&D investments and the foundational infrastructure provided by the host jurisdiction. Hence, we emphasize the continued relevance of physical presence as a primary nexus for taxation, it provides a tangible and robust link to where businesses activities and profit generation occur. While physical presence remains a key nexus, but noting that business models continue to evolve, we are open to better understand the alternative nexus rules identified in the issue notes. A differentiated approach may be necessary considering the diverse nature of services. More clarity is needed on any suggested new nexus rules would operate, their economic impact, and potential implications on both the residents and source states. Consultation with businesses and other stakeholders is necessary to ensure the robustness of our deliberations. Moving on to the second protocol, tax certainty is essential for international trade and investments by reducing compliance burden of businesses and the risk of over taxation or double taxation, which is especially crucial for encouraging cross-border trade flows and foreign investments in today's challenging business climate. We urge all Member States to work together on solutions to overcome barriers identified in the issue notes, building up the capabilities of tax administrations to implement the various dispute prevention and resolution mechanisms, as well as strengthening collaboration to resolve cross-border tax disputes in a timely and efficient manner. Lastly, to achieve the broadest possible participation in the two protocols, we support the concept of optionality within the protocols. This would allow member states to adopt relevant provisions in the protocol in line with their unique needs, circumstances, and policy priorities. To conclude, Singapore will continue to play a constructive role in the work streams, and we look forward to a fruitful discussion and working with all delegations to build common ground and find feasible solutions. Thank you.

Thank you. The distinguished representative of Third World Network.

Thank you, Mr. Chair. I have the honor to speak on behalf of Third World Network, Tax and Fiscal Justice Asia, and the Global Alliance for Tax Justice, of which TAFJA is a proud member. Protocol 1, the taxation of income from cross-border services in an increasingly digitalized economy, while vital for developing countries, is also important for developed countries and industrialized countries, including members of the EU. Due to the nature of their businesses, digital companies provide services in market jurisdictions without any physical presence or permanent establishment, and therefore incur no income tax liability in those jurisdictions. Thus, the outdated standard of permanent establishment or physical presence should be replaced with the concept of significant economic presence. with taxing rights allocated among jurisdictions based on revenues generated in the market jurisdiction, as well as other factors such as assets and personnel located outside that jurisdiction. In any event, developing countries and even developed countries may want to rightfully address their inability to impose income taxes on non-resident digital companies by imposing digital services tax or final withholding tax on gross revenues. The right to do so should be respected. They should not be targets of trade sanctions or any other retaliatory tax measures. Furthermore, we note that multinational corporations and their subsidiaries operate as a single enterprise and should therefore be taxed as such, with their consolidated net taxable income distributed to the different taxing jurisdictions where they operate. virtually or otherwise, based on an agreed formula apportionment under a unitary tax regime. This would address the controversy surrounding yet another dysfunctional system that enables profit shifting, tax planning methods that employ transfer pricing to shift revenues and expenses among different tax jurisdictions, and the transfer pricing rules that govern them, which yet again, cannot keep up with the developments in the provision of cross-border digitalized services. Mr. Chair, failure to address these issues will allow the persistence of an utterly untenable situation where there is transfer of wealth from society to a small corporate elite and from developing countries to rich nations. Thank you.

Thank you. The distinguished delegate of Ghana on behalf of the African group.

Thank you. Let me begin by extending our warmest congratulations to the newly elected members of the Bureau. We also take this opportunity to express our sincere gratitude to you, Mr. Chair, the co-leads of the various work streams, all members of the Bureau, and the secretaries for the exceptional work undertaken during the intersessional period. The Africa Group acknowledges the significant effort invested in preparing the detailed issue notes and the thoughtful facilitation of consultations. We are equally thankful for the insightful written contributions from Member States, which provide a solid foundation for our deliberations this week. The ARFAG group approaches this session with hope, determination, and a profound sense of responsibility. We are not here to replicate outdated structures or reinforce existing imbalances. Rather, we are here to co-create a system that works for everyone, a framework that levels the playing field. We also envision a convention grounded in equity, transparency, and the sovereign right of every nation to justly raise revenue from economic activities within its borders. With respect to Work Stream 2, the Africa Group stresses that the protocol must be future-proof. encompassing a broad range of services, including digital and emerging sectors. It must uphold the principle of taxing where economic activity and value creation occur, adhere to simple and administrative rules, and incorporate a robust multilateral solution to overcome the limitations of existing tax treaties. With respect to Work Stream 3, the Africa Group emphasizes the urgent need to address cross-border tax disputes in this globalized economy. that often disadvantages countries with limited access to dispute resolution mechanisms. The group calls for a fair, accessible, and balanced dispute resolution framework that avoids replicating inequalities, inequities of investor-state arbitration. It also supports optional mechanisms with strong safeguards and technical support, including joint audits. capacity-sensitive APAs, and regionally adaptable compliance models. Mr. Chair, as we embark on this critical week of negotiations, the Africa Group urges all members to engage with genuine openness, collaboration, and a shared commitment to justice. Let us rise above old divisions and work together to forge a fair, sustainable, and future-ready global tax framework, one that truly serves the interests of all nations and peoples. The time for decisive, constructive action, Mr. Chairman, is now. Thank you.

Thank you. The Tongue is representative of European Network on Debt and Development.

Merci, Monsieur le President.

Thank you, Chair. I speak on behalf of the Global Alliance for Tax Justice. Regarding the questions raised under work stream three, namely main obstacles to the prevention resolution of tax disputes, we would like to stress the need to address the root of the problem, namely the current business taxation system based on transfer prices. This system is obsolete. and it is not adapted to its goal. It prevents countries from effectively taxing multinationals and generates a number of disputes, resolving which is costly and time consuming. comparable transactions approach is based on an erroneous hypothesis, namely that different units of a same multinational company can be taxed as independent users and that there are comparable transactions that can be used. We believe, on the contrary, that multinationals should be treated as single, cohesive units and taxed on their global revenue. That's why the UN convention should introduce a unitary tax system that has a specific formula for this purpose, which would allow to address the root cause of the majority of tax disputes and would prioritize prevention through a simpler, more effective and fairer system. We also warn against false solutions As European delegates know full well, preliminary agreements on transfer prices were at the heart of a major tax avoidance scandal and were used by tax havens in order to give multinational companies special advantages. These preliminary agreements on transfer prices can also bind tax administrations that limit their capacity for action if tax avoidance mechanisms were to subsequently appear. We also believe that mandatory arbitration should be firmly rejected, the negative impact of investor state disputes. is a clear warning against using such mechanisms for tax disputes. Finally, regarding optional mechanisms under the protocol, we believe that the United Nations Tax Convention should establish a solid agreement and create a coherent and uniform international system. Contrary to the OECD agreement, the UN should not be fragmented by opt-in or opt-out clauses. Ladies and gentlemen, we look forward to this week's debate and look forward to contributing to the work of the committee as well. Thank you.

The delegate of Nigeria.

Thanks, Chair, and I bring greetings from the Federal Republic of Nigeria to all delegates, and we are making this statement in support of the position already presented by the distinguished delegate of Ghana on behalf of the African group. Mr. Chair, Secretariat, and colleagues, in the African parlance, when the drumbeat changes, the rhythm has also changed, and dancing steps must change, otherwise you will dance off key. So we are glad that from the room this morning, we have had colleagues and delegates agree to the fact that the where businesses have been conducted have changed. Therefore, there shouldn't be any dispute as to the need to change the rules. The rules are no longer fit for purposes, and they must therefore change. So Nigeria recognizes that inadequacies in the current rules, and we are glad to be in the room to start the discussion with other delegates or not to design the new rules that are fit for purpose and to be able to address the current challenges that the entire globe is facing. Regarding the second protocols, we are aligned with the submission by Ghana, and we need to look into how we are going to address the current challenges that limit quick resolution of dispute. We must design protocols that are simple in language and people are able to understand both the task administrators and the task practitioners, so that even from the protocols, there will not be misapplication or misinterpretations of the terms therein. We must say that as developing country and other developing country like Nigeria too, we do not feel for any form of mandatory arbitration. This is against our own rule and we cannot work with that. With those few words, we welcome and we are committed to this process. I thank you, Chair, for giving Nigeria the floor. Thank you.

Thank you. International Chamber of Commerce.

Thank you, Mr. Chair. The International Chamber of Commerce would like to provide input on the UN Intergovernmental Negotiating Committee workstream two and three, emphasizing the need for a consistent, stable, and certain global tax system to foster trade and investment, which are key drivers of sustainable growth and poverty reduction. We note with concern the growing complexity in the international tax landscape, including proposals for new sector-specific taxes and expanding the scope of gross basis withholding taxes on services. These taxes are particularly distortive as they do not account for the actual cost of providing services. They raise the cost of doing business, reduce returns on investment, and ultimately deter cross-border investment. When new taxing rights are created, they must be based on a proper economic nexus. a substantive engagement beyond the passive receipt of services. For this initiative to be successful, it is of fundamental importance to ensure there is no fragmentation in the system and that legal and tax certainty are at its core. Proper economic analysis for any of the proposed solution is vital. The draft issues note for work stream three rightly underscores the challenges of litigating tax disputes, including the lengthy timelines and high costs, particularly in cross-border cases where double taxation risks may persist. We believe that prevention is key. Legal certainty provided in advance through clear rules, early engagement, and cooperative approaches can avoid costly disputes. Alternative dispute resolution, ADR tools like arbitration and mediation are also welcomed by the private sector as they offer quicker, more cost-effective solutions than traditional litigation. When it comes to dispute resolution, taxpayers have a crucial role to play as holders of key information. Their active involvement, especially in clarifying facts and business models, can prevent disputes and aid in timely resolution. To ensure the full spectrum of real-world business model is considered in the drafting of protocols, we strongly support the establishment of a Business Advisory Council, as it was previously proposed. A council of 20 representatives from all UN regions would bring diverse views and constructive, transparent input. This mechanism is essential to ensure that outcomes are workable balanced and reflect global business realities. In conclusion, we reaffirm our commitment to constructively participating in this process, helping to shape tax solutions that are practical, effective, and predictable for all, and that contribute to the fulfillment of the Sustainable Development Goals, including SDG 8 on decent work and economic growth, and SDG 9 on industry, innovation, and infrastructure. Thank you, Chair.

Thank you. The distinguished representative of the Major Group for Children and Youth.

Thank you, Chair. I take the floor on behalf of the FFD Children and Youth Constituency and the Major Group for Children and Youth. We would like to first express our appreciation to the Bureau and the Secretariat for facilitating active children and youth participation last week, and we hope that this intergenerational partnership continues. Chair, we believe that an equitable tax convention cannot exist without the regulation of cross-border services in both the digitalized and globalized economy. We firmly believe that the two protocols discussed are fundamental to this. Acknowledging this, children and youth would like to offer two at-large suggestions to the protocols. First, we call for protocols that are future-proof. Recognizing the growing role of the digital economy, The text of the protocols must establish a strong multi-sectoral nexus, allowing for a future-proof collaboration between member states, stakeholders, rights holders, and the private sector. We believe that children and youth can serve as a nexus, offering new experiences and fresh perspectives across various sectors, from sustainable development to artificial intelligence. We call for active participation of children and youth in the drafting process of future protocols, ensuring that meaningful intergenerational partnership is protected and further enhanced. Secondly, we urge the protocol to place equitability as a priority. Specifically, in the emergence of the digitalized age, it is essential that we ensure that all states have the means to actively keep pace with such advancement. we call for increased investment in the sustainable technological advancement of low and middle income countries, including LDCs, LLDCs, and SIDS states. Namely, through continued investment in the implementation of the protocols in the future, we can create a convention which allows all states parties to be active contributors to a just and equitable tax system. Distinguished colleagues, Mr. Chair, Children and youth remain committed to transforming the principles of fairness, equitability, and inclusiveness into effective protocols that can sustainably address the most critical challenges of international taxation policy, not only in the present, but also the future. We thank you.

Thank you. Distinguished delegate of Novatex Lab.

Okay. Chair, distinguished delegate, thank you for the floor. This document summarizes the Novatex Research Lab position on the first early protocol. We emphasize that under the terms of reference, the protocols will be legally binding. During last week's suggestions for some delegations that they might be optional would undermine the convention's credibility and effectiveness. Legal clarity and binding commitments are essential. The old tax rules were designed for a very different world. Today, a shift to technological and political change makes it difficult to predict the future or to reach a consensus on diverse interests. But there are clear starting points. we reaffirm the necessity to coordination action. National sovereignty over tax policy, it's fundamental. Yet in a globalized world, a country's tax decisions, inevitable, have cross-border effects. often negative, driving harmful tax competition and a race to the bottom. International cooperation is therefore essential for fairly taxing cross-border service, ensuring domestic justice and protecting human rights. We welcome the TOR language recognizing each member state's sovereignty right to decide its tax while also respecting the sovereignty of others. However, we believe this principle must be carefully qualified within the protocols included in this one. On the technical side, there is still no agreement on what constitutes a fair allocation of taxing rights. Last week, discussions focused on three principles: economic activity, value creation, and revenue generation. While these are useful starting points, the matter remains controversial. We call for further debate on and criteria, including whether global tax standards should merely ensure equal treatment of states or also address historical inequality. And if so, how such corrective measures would be defined and enforceable. Protocol should balance flexibility for the future with specific commitment to address today's urgent challenges. It should also be designed to ally with potential future dispute resolution mechanisms, ensuring currency across the conventions framework. Finally, we are concerned about the pace of negotiations. Much time last week was spent revisiting decade old debates, taxation at source versus residence, definitions of value creation, minimum high core convention issues such as capacity build support, inclusive representation, the conference of the parts and the secretary received too little attention. Scholars have ever suggested that tax education compliance cooperation should be formally included in the convention. This is a unique opportunity to build a fully inclusive and effective international tax cooperation and to straighten global tax governance. We must commit to making the most of it. Thank you.

Thank you. The single delegate of Mauritius.

Thank you. Mr. Chairman and honorable delegates, very good morning to all of you. Let me at the outset express our sincere thanks and gratitude for the opportunity given to us to make these general statements. MERSUS has always been and will remain an active participant in the various initiatives on the international front in the field of taxation and transparency. Our continued participation in the work of this committee is evidence of Mauritius' commitment to the global efforts in enlisting international cooperation and support in the fight against tax malpractices, addressing emerging tax issues and developing solutions, for example, for a more effective resolution of tax disputes. Mr. Chairman, in all these endeavors, MUIS shares a strong view that there should always be a level playing field, fairness and equity. We should also strike the right balance between regulating and protecting legitimate rights of countries and ensuring that we do not create unnecessary hurdles for cross-border trade and investments which are the very foundations for economic development of all countries. Success can only be achieved through concerted efforts among all of us. as well as stakeholders, including the business community. Responsibility is a collective one. We must each do our share. So, Mauritius looks forward to continue working with all the delegations, including the Africa group, as we progress in developing the required rules. Thank you.

Thank you. Is there a representative of Mumbai Chartered Accountants Society?

Thank you, Chair. I believe the gross basis of taxation is not as bad as it is made out to be. It's an accepted method of taxation of cross-border transaction. It has prevailed in the tax treaties for a number of years, as well as in the domestic law for the income like interest, royalties, fees for services. Now, one may argue that, well, these are passive income. and services is more of active income. Now that issue can be handled by ensuring that the countries get into a detailed negotiations to determine what is the correct rate of taxation, what is the correct rate of cross business taxation rate for the income. So if the profits margin are considered to be lower, the rate of tax could also be lower, so that should avoid the risk of over taxation. One may consider the possibility of maintaining some kind of a database which may give some guidance on what is the standardized profits generated by certain categories of services. Alternative approach could be that the MNE may have the option of offering income to tax on a gross basis. or on a net basis, as it is considered in one of the UN model articles. It should also be considered that the net business of taxation is not always easy. In a cross-border businesses, certain expenses are incurred in the country of residence, certain in the country of source. It becomes always difficult for the officer to examine the validity of the expenses claim and also for the MNE to claim deduction or justify expenses in which it's claimed. So net basis of taxation has its own set of problems. Yet another approach could be to simply accept the DSTs. Maybe more than 30, 40 countries have already invoked or levied DSTs by now. If the country of residence starts giving credit for DSTs, that could be an easier solution. So as of now, broadly, there are three options, go for simple gross basis, or gross basis with the option of net basis taxation at the adoption of MNE or acceptance of DSTs. It is said that whatever method is derived, it should be a future proof. Now, it may be very difficult to determine what's going to the business model after five years. Now, that issue can be settled, you know, by, at least by ensuring that maybe at a regular interval, say every five years, The business models are re-examined and that becomes the mandate of the committee or a part of the protocol itself and new methods are determined. So these are my broad comments. These are three methods which I could think of and I'm sure collectively this committee and this room will certainly come up with more methods. Thank you.

Thank you.

Thank you, Mr. Chair.

The United Republic of Tanzania, full alliance with the statement delivered by Ghana on behalf of the African group, and with the interventions made by Nigeria and the other delegates. Mr. Chair, on work stream two, we strongly support an ambitious and a future-proof protocol on taxation of income from cross-border services. This must include our traditional, digital, and emerging services. Mr. Chair, our tax rules must reflect the reality that today's businesses can generate substantial income from our markets without any physical presence. Where value is created in Tanzania, tax should be paid in Tanzania. For this reason, Mr. Chair, we support simple and effective rules, such as gross business withholding taxes, where no physical presence exists. We also see value in drawing from the UN model tax convention, articles 12A, 12B, and 12C, which will lead to balanced taxing rights between source and resident states. The protocol should also help overcome outdated treaty restrictions. It must also include strong anti-avoidance rules and ensure that the tax burden is not shifted to consumers. On item three, Mr. Chair, we welcome the recognition of barriers developing countries face in preventing and resolving tax disputes, especially capacity gaps and the asymmetries in treaty networks. The focus should remain on cross-border disputes with optional best practices for domestic disputes where linked on international tax issues. We strongly oppose to importing trade or investment style arbitration models, including arbitration, which have historically disadvantaged developing countries, including Tanzania. Mr. Chair, Tanzania is committed to working with all member states to deliver protocols that are fair, simple, and effective, and that generally enhance our ability to mobilize the domestic revenue. Thank you, Mr. Chair.

Thank you. Distinguished delegate of Cote d'Ivoire.

Thank you, Chairman. Cote d'Ivoire strongly supports the statement of the African Group, which was delivered by Ghana. We also would like to align with the statement of the delegation of Nigeria and Tanzania. I'd like to address protocol one first on taxation for cross-border services. Cote d'Ivoire believes that given the erosion of fiscal receipts linked to the digitalization of activities and the failings of current rules to ensure equitable taxation of such activities, that it is important to recognize which countries, that countries have exclusive rights for taxation of revenue when it happens in situ for cross-border services, including digital services, provided without a physical presence. With that in mind, Côte d'Ivoire believes that it's important to focus on taxation at source and withholding the taxation at source using a gross basis as a general rule. Cote d'Ivoire also supports the introduction of relevant criteria for such taxation, including on the local turnover figure, and we recommend targeted market analysis and the use of data provided by local operators. Protocol 1 should cover all cross-border services, including automatic services or automised digital services, and all of the provisions of Protocol 1 should be simple, manageable and adapted to the local realities with oversight via financial by financial services in country. We believe that exchange of information and access to data of digital platforms is also vital to achieve this. Finally, to conclude on protocol, when we call for a protocol which guarantees equity, neutrality, mobilization, including national or domestic resources, taking into account the specific characteristics of developing countries. Protocol 2 now on dispute settlement. We support the development of multilateral protocols to ensure legal certainty, prevention of double taxation, and the heightened mobilization of domestic resources. This protocol should, as a priority, cover different cross-border disputes and mechanisms should be applicable even in the absence of an international taxation convention or a multilateral or a bilateral convention in this area. We believe that transfer pricing should be addressed as there need to be cooperative compliance approaches so that tax administrations can work together. In our view, the friendly settlements of disputes should remain the or amicable settlements of disputes should be the first should be prioritized. This could be bolstered by mediation or, if necessary, arbitration. However, these should remain optional. We would therefore welcome a system of optionality for these alternative modalities with a common a compulsory procedural basis. This needs to include a steadfast commitment to capacity building for tax administrations and promoting the use of safe, secure digital tools for the settlement of litigation of nurse while ensuring the participation of developing countries in international tax systems. Thank you.

Thank you. Distinguished delegate of Zambia.

Thank you, Mr. Chair, for giving me the floor. We just want to echo that Zambia supports this statement made by Ghana on behalf of the African group, as well as the statements made by Nigeria, the United Republic of Tanzania, Mauritius, and Cote d'Ivoire. We do realize that the two protocols are really important, especially if and they are cardinal for domestic resource mobilization, and especially if we are to meet the sustainable development goals. We do understand that and acknowledge the existing frameworks, especially when we're looking at protocol one, but it's building up on that and seeing what hasn't worked and what has worked. And with regards to developing countries, and especially if we're looking at cross-border services, We do agree that capacity building of the capacities of developing countries has to be taken into consideration when it comes to developing these protocols and we hope that this is going to be achieved by this framework, not only for on cross-border services but as well as dispute resolution. So I thank you, Chair. Thank you.

Thank you. And to this extent, we have heard all the speakers in the speakers list. Uh, so, uh, now the formal meeting is adjourned. So now everyone, we are gonna convert to a, uh, the informal meeting, so we're gonna pause for 10 minutes, uh, just to do the setup of the presentation and the podium. So, I, uh, you can move your legs, but I recommend not to go out of the room because we will start immediately. So we were just posing for 10 minutes. Thank you.

Play all songs of the Kapil Sharma Show.

Who are you?

I said I am.

Play from the Khan Ride Destination Weekend Dhamaka.

You're welcome.

I don't.

Hello everyone, welcome back. Excellencies, dear colleagues, welcome back and thank you all, member states and the stakeholders for your active and thoughtful engagement through our last week's discussions. The momentum we have built together is encouraging and I look forward to the same spirit of focus and cooperation in the days ahead. We now begin the second session of the international intergovernmental negotiating committee turning from the framework convention itself to its two early protocols. The first on taxation of income from cross-border services, services, tackles one of the most pressing and complex challenges of our interconnected and increasingly digitalized global economy. The second on prevention and resolution of tax disputes is essential to build trust, ensuring predictability and promoting fairness in international tax cooperation. Together, they are designed not only to address today's challenges, but also to offer adaptable solutions for, for, for future developments in the global tax landscape. tax landscape. These protocols are the wheels of the framework convention. They give it movement and direction. Like well-aligned wheels, they will carry the convention vision forward, turning principles into practice. Their strength and balance will determine how effectively the convention operates, how smoothly it navigates challenges, and how far it can take us toward a fair and more effective international tax system. Excellencies, your interventions this week will shape the scope, direction, and pace of our intercessional work. The clarity, depth, and ambitions of your contributions will guide the road ahead. Work on Protocol 1 is in the capable hands of the co-lead, Ms. Lisa Lott-Kana. I will now hand the floor to Lieselotte to describe the work to date on work stream 2. The floor is yours.

Thank you, Chair. And while we get the presentation up, thank you all for your encouraging statements this morning. It is really, truly a great pleasure to hear the enthusiasm and importance of this work stream. So thank you for those words. We have had a quite heavy work meeting load May and June in this work stream, and we are very pleased to have been able to the input in those meetings online with more than 100 participants. It's been really incredible participation. Thank you all. We have been able to produce an issues note, which we were able also to send out to all of you, and we have also got lots of comments on that. So, thank you all for this engagement with this workstream. So, please, the first slide. We are going to go through this presentation. There are some technical slides here. We will go through the whole presentation and then we will come back and have discussions on them. So this is actually hopefully going to be a technical input into the work stream. So first of all, the work stream heard that most significant barriers to taxing cross-border services consisted of legal barriers in tax treaties. that do not reflect current ways of doing business. So this was the first point that we were hearing quite a lot from several members of the participants in the work stream. Also a statement that developing countries impose gross basis to withholding taxes on almost all payments made from their jurisdictions. And this allows them to tax without regard to where services are provided. So this domestic legal norms actually are curtailed by tax treaties. That is the reflection that we came up with. So treaty rules that allow taxation only when the service provider has a physical presence in a country, do not align well with those domestic systems. That is a firm conclusion of the meetings. Next slide, please. Also, digital technology make it easier than ever to provide services remotely. Of course, we've heard that a lot this morning. Some services do, of course, still require physical presence, but a change of the way services are provided today, and particularly the ways that we earlier, you know, with the models that we use where taxation is actually only, almost only awarded the country with a physical presence, that is basically a completely different situation from today. And therefore, we need to reconsider these things. So the focus has been on the treatment of digital services, but that's not the only thing that we wanted to include in this work stream. There are concerns also regarding fees for management, technical and consultancy services. And this goes back to decades and of course the changes that we have included in the UN model. The workstream considered a number of situations and we're going to have a look at them later on in the slides to ask, and I will highlight, if there were no existing international tax rules, Should the state where services are consumed have the right to tax the payment? And what would be the justification for doing so? Those were the questions that we tried to discuss in the meetings. Next slide. So I will now give the floor to Patricia, who has kindly offered to go through us technically. on -- and explaining these slides. We're not going to open the discussion yet, Chair. We do that -- we will come back to this. But we're presenting the cases now so that you can think a little bit about it. Please go ahead, Patricia.

Thank you, co-lead. And thank you, everybody, again. We should emphasize that these are not all of the examples that were considered. We decided not to put you through all that since the workstream discussed them for three or four weeks. So this is a selection to illustrate certain things. So in this first example on intracompany services, we have BigCo. who is -- that is resident in State R. It owns SubCo, which is in the agricultural business, producing, I guess, flowers, given the icon here. And so SubCo is paying fees for specialist services to BigCo in State R. And in this case, Big Co employees are in state P for fewer than 183 days a year. And so these specialist services might be soil testing, other, we have a chemist here and we have a farmer, so there might be advice on the agricultural various agricultural questions that come up. And so the question in all of these slides is how to share taxing rights between state P and state R. Katie. And then we have two examples on legal services to avoid messy questions. We have a sole proprietorship, which is a firm with one partner providing legal services to Client Co. in State S. And in the first example, those services are provided through a lawyer who is actually in State S. And so the question is, should state-- how to share the taxing rights between, and that should be state S and state R. So that's the first version of this example. And then if we go to the next slide, in this case, the The lawyer does not actually go to State S in order to provide the services. In this case, the lawyer is providing the services from the offices of the sole proprietor in State -- proprietorship in State R. And then we have a fairly simple example on digital services. In this case, we have Social Media Co. that is in State R. The Big Co. in this case is actually in State P, which is also where the users are. But Big Co. is purchasing advertising from Social Media Co. So its advertisements are available on on its site. And Social Media Co. is, its user is also in state P, and Social Media Co. is providing content plus advertising. So, to the user, and of course, the users activities on the social media company are also valuable to the social media company as it helps to inform the algorithm.

Thank you very much, Patricia. These four slides were actually part of the discussions that we had at the work stream. So the idea here is for some of us who have looked at them, of course, listened to the input from those of you who were not part of the work in the work stream and see if we could add something to our issues notes on issues that you actually raised today. So the primary goal of any new rules, I mean, this is the discussion on different approaches, so it's sort of a question, actually. should be to support domestic resource mobilization by providing for a fair allocation of tax revenues. We discussed last week about the fair allocation of tax and taxing rights. So that is, of course, part of the umbrella for the discussions in this workstream. Other goals could be or are eliminate barriers to cross-border trade and investment, be aligned with economic efficiency and short tax neutrality, achieve simplicity and administrability. And finally, new nexus rule must be future proof. Oh, at last, we will try and aim for it by satisfying criteria, even as business models change in ways that are impossible to now foretell. So that, of course, we will have to be a little bit looking into the magnifying glass for future, but hopefully we could at least think about ways forward there. Next slide. So these are the more possible discussions on the approaches. New Nexus rules, we are open. We do need to think out-of-the-box. What would be the continued role of physical presence? What is the role of net and gross basis taxation? Could there be a possibility of different rules for different types of services? And finally, not least, taxes covered. There is a proliferation of taxes that are involved in services, and we do think that we need to discuss the taxes and how we make sure that the provisions that we will try to include here will be related to all taxes that are related to providing these types of services. A very flexible way of looking at taxes is probably required, but that is also something that we would like to hear comments on. I think that was it. This is the questions for the plenary. We will keep this up at the end, after we've gone through the examples. So the first questions are whether the issues note comprehensively describes current rules for the taxation of services and the reasons behind the call for change, or whether there are additional considerations that should be taken into account in the work streams deliberations. So, this is extremely important that the first issue here is to absolutely make sure that the issues note correctly reflects the current rules for taxation. So, that is the first challenge that we have and we would like to hear from you on this issue. Second, what considerations are most important in developing possible new rules for the taxation of services? Of course, also very important. And how the workstream can best define the scope of the protocol in terms of the taxes and services that it will cover. So that is the end, I think, of the presentation. We will go back then, Chair, to the technical slides. and open up the discussion on the first example to hear from you on this. Thank you. You, Alastair, you want to say something? No? Okay.

Thank you, Lisa. Thank you, Patricia. So now we are opening the floor for the technical discussion on the presentation and the slides that was presented by the Secretariat. And for all the points that, uh, that the co-lead Lisa went through in this presentation, so the floor is now opened. The distinguished representative of the Russian Federation.

Mr. Chairman, distinguished colleagues, thank you for giving me the floor. I'd like to begin by thanking the Secretariat and all the participants of the working groups for the work that has been carried out to prepare the issue notes for Working Stream 2. This issue note proposes three questions for discussion, as we just saw. Regarding the first question, in our view, section 3A provides a full and comprehensive description of the existing rules concerning the taxation of cross-border services and the reasons that necessitated the revision. As for the other two questions, on the aspects that we consider most important in developing new rules for the taxation of services and how to best define the scope of the protocol in terms of the taxes and services it will cover. I would like to elaborate on that aspect further. At the current stage of globalization and internationalization of tax cooperation, we understand the concerns of many countries regarding the need to preserve national tax sovereignty and consider the capacities of the tax administrations of all countries. Therefore, when it comes to developing the protocol on services, Russia proposed prioritizing practicality, universality, and the feasibility of its implementation. We therefore believe that the approach being developed for taxing income from services should meet the following principles. A new approach should involve simpler regulation and be understandable for reporting purposes as well as easy to implement. This can be achieved, in our view, by establishing a tax at source that would be similar in characteristics to the tax withheld at source provided by Article 12AA of the UN Model Convention. In order to ensure simpler, more clear regulation, we believe that it would be optimal to collect the tax on the gross amount of revenue. At the same time, it is also important to set the source tax rate at a level that on one hand would support the achievement of the Sustainable Development Goals and on the other hand would not hinder cooperation between countries. For example, for transactions between independent entities, lower tax rates could be established compared to higher rates for intra-group services and of course the tax rate itself is something that should be discussed and further considered in future meetings. Special attention must be given in our view to clearly defining the concept of cross-border services in an increasingly digitalized and globalized economy. We believe that this term should cover all services to avoid complications in distinguishing between types of services or methods of their delivery. In addition, no thresholds or limits of any kind should be set regarding the transaction value for applying the new approach. We would also like to note that concepts such as value creation and significant economic presence, in our view, introduce greater legal uncertainty for both taxpayers and tax authorities, and they therefore complicate or could complicate tax administration. In conclusion, I'd like to note the following. It is clear that it is important to avoid conflicts with international treaty norms and prevent the nullification of proposed regulations by existing tax agreements. It is also important to eliminate potential double taxation. In this regard, we believe that the new approach to taxing cross-border services can be implemented through a multilateral international convention under UN auspices, which would amend existing bilateral agreements, including double taxation agreements. Thank you.

Thank you. Thanks, delegate of Kenya.

Thank you, Chair. I make these comments on behalf of the members of the Africa group. The Africa Group appreciates the contributions made by the co-lead, the secretariat, and member states in the development of the issues notes. And in response to the questions raised in the issues note, we would like to submit as follows. The Africa Group advocated for the simultaneous negotiation of Protocol 1 to address the challenges faced by its members in taxation of cross-border services in order to ensure fair allocation of taxing rates and enhance domestic resource mobilization. On the first question, while we acknowledge that the note captures the discussions of the work stream and the concerns that were raised by African countries, the current rules and reasons behind the calls for change that have been described in the note may not be exhaustive because not all parties took part in that discussion. On the question regarding scope, while we acknowledge that the scope of the protocol has not yet been defined, Our position is that the protocol should cover a wide range of services, including digital services, as well as new and emerging services, and not be limited to traditional services. This will ensure that the provisions will truly be future-proof, as advocated in paragraph 14 of the note. On the question regarding considerations for developing new rules, The position of the Africa Group is that the protocol should enhance fair allocation of taxing rights, but by ensuring that taxes are paid to the governments of countries where economic activity occurs, value is created, or from where revenues are generated, as recognized by Resolution 78/230, as well as any other relevant factors. The Africa Group notes and supports the general acknowledgement within the work stream as contained in paragraph 13, that the current rules of taxation of cross-border services do not reflect current ways of doing business. Chair, we believe that this acknowledgement automatically takes us away from the calls for compatibility or conformity with the existing policies or practices. Paragraph eight of the note includes a recognition that new ways of doing business has led to the exploration of broader nexus rules. The rules for the taxation of services should therefore not be based on outdated principles, such as physical presence, but should reflect the current business models emanating from globalization and digitalization. The tax rules should comprehensively take into account the contributions made by source states and ensure fair allocation of taxing rates by recognizing market contributions to the generation of income. The Africa Group believes that the recent updates to the UN model to include Article 12AA, which applies gross basis taxation on any service, Article 12B and 12C provide a good example of recognition of new ways of doing business, as well as a balance in the allocation of taxing rates between the source and resident states. The protocol should also adhere to the principles of simplicity and ease of administration as laid out in the terms of reference. and should therefore provide for rules that are simple and easy to administer, such as gross basis withholding taxes or simple apportionment of income to relevant jurisdictions for certain forms of digital income. And we'd also just like to reiterate the challenges that were expressed by developing countries in terms of net basis taxation. Since many countries, especially those within the Africa group, face challenges in this area due to the restrictions imposed by outdated and unduly restrictive tax treaties, this protocol should also include a multilateral solution to these restrictions, such as a fast-track instrument or a provision within the protocol to update the existing treaty provisions. The protocol should also adhere to provisions that will prevent tax avoidance eliminate double taxation, and prevent shifting of the tax burden to the consumers of services. The Africa Group once again appreciates all the efforts that have gone into the development of the Work Stream 2 issues note and restates its commitment to continue contributing to the discussions. Thank you, Chair.

Thank you.

Go to the slide after.

Distinguished delegate of Algeria.

Mr. President, distinguished delegates, Algeria aligns itself with the statement delivered by the African group and wishes to add the following in its national capacity. For tax assessment purposes, The criterion of physical presence within the territory of a state has shown its limitations in an economic environment dominated by intangibility, the dematerialization of services, and the rise of the digital economy, all of which can operate without any physical substance. Indeed, the new digital business model allows companies to establish stable commercial relationships and generate significant financial flows within a state without being physically present there. The current model also creates a competitive distortion between local service providers, who are subject to taxation, and foreign service providers with no physical presence in the country, who may enjoy an unjustified tax advantage, thereby leading to unfair competition. In light of these limitations, it is necessary to identify new complementary criteria capable of capturing the economic reality of cross-border services. The protocol should establish clear, simple, and easily administrable rules with sufficiently broad scope to cover all cross-border services, including, in particular, digital services, intra-group services, and business-to-consumer services. The objective, therefore, is to adopt new rules that also enable source countries to secure broader tax coverage adapted to the diversity of business models. This new approach will reconcile the imperatives of tax equity, administrative efficiency, and international coherence. while protecting the legitimate rights of market jurisdictions in a rapidly expanding digital environment. Furthermore, the protocol should take into account the constraints faced by countries with respect to bilateral treaties, underscoring the need for an effective and expedited mechanism to implement the new rules adopted under the protocol in order to eliminate the existing imbalance in current bilateral tax treaties. Finally, the taxes covered by the protocol should be limited to income taxes. Algeria once again appreciate all the efforts undertaken in preparing this issue and reaffirms its commitment to contributing to the work of the Framework Convention and its two protocols. I thank you.

Distinguished delegate of Iran.

Thank you, Chair. Chair, let me join in others and thank you and your colleague and the secretariat for your good work. And then on this, and then let me also thanks for the presentation. I have a couple of issues wanted to share. We know that for the developing countries, the issue of sharing taxation right through tax treaties is a critical matter. A few of them mentioned by Kenya on behalf of the African group. Just I wanted to highlight two or three issues more. We know that while the stated goal of this treaty is to prevent double taxation and encouraging foreign direct investment, FDI. The reality can be far more nuanced and in some cases disadvantages to the developing countries. Just let me highlight a few of them. One is the revenue mobilization versus investment attraction. the fundamental, it's a fundamental dilemma and the developing countries need tax revenue to fund public services and development project. However, in reality, they are often pressures to sign treaties that reduce their taxation rights, especially on FDI. And then that's an issue that needs to be considered. Another issue is asymmetric bargaining power. That is also exist. So we can see that in unequal negotiations, when developing countries negotiate with developed countries, there is often a significant power imbalance. The developed countries has more resources, expertise, and preexisting tax treaty models for at least many countries from the developed world that often favors the country of residence. That's a privilege for them. And then we need to consider this one in this process. And another one is there is the tax model that's favored by developed countries and then generally gives more taxation right to the investors' countries of residence. That is also that we need to consider in this process. The other issue that is highly important is the role, rules, and regulations that apply for the companies. That is also another issue that we need to consider that one. And my final issue is the technical and capacity building that developing countries need. Besides the lack of infrastructure, complexity of the tax treaties, it's an issue. Tax treaties, we know that it's a very complex legal document that requires a high degree of technical expertise to negotiate, interpret, and as well as for implementation. And I should highlight that this was that At least many developing countries lack such a kind of capacity building for the time being, especially in our group, LDCs, as a left behind and then capacity building and especially infrastructure that is needed is highly important. Thank you.

Thank you very much. There is no other flags up. I would just like to comment that Just to make, you know, we've had, you know, a discussion by many delegates, many participants in the work stream. So, you know, the first part of this discussion here is to get everyone that hasn't participated up to scratch on what was done and what was discussed. And secondly, the important point we want to hear from you if there is anything missing from our issues note. It's not the balance note, because sometimes in the work of the UN, we've sort of said this has this view and this has this view, and you try to balance the views. Here is not a question of balancing views, it's a question of including all the views that are represented. So please, with that in mind, if you do have any more comments, that's very welcome. Otherwise, I would take it as the issues note, which I think is actually a very good issues note. It probably includes everything. And we've also received a lot of comments on it. And it's been a challenge to read all of it, but I have a resume. So I must say I have been able, I think, to get all the input that was given to you all. I got Jamaica, so please go ahead, Jamaica.

Thank you very much, Chair. I'm just seeking some clarification from work stream two on whether the intention is to try to develop a multilateral instrument for cross-border services. I'm not clear on whether or not there will be different approaches that will be suggested that countries can choose from, or whether we are looking to develop a multilateral instrument. I had also hoped to see more discussion on digital services tax regimes, which have gone through this process of dealing with the issue of cross-border taxes, particularly as they relate to digital services and what the experience of those countries had been, given the fact that pillar 1 was supposed to have been the solution to these many newly natural digital services taxes. I'd hope to have seen some background as to what the experience had been there with digital services taxes.

As it relates to what we hope will emerge.

Is a solution that is, and this has been echoed by others, one that is simple, efficient, workable, and which is not resource intensive because it takes as much resources for a developing country as it does a developed country to implement complex solutions. And so we're hoping that what emerges will meet that criteria. Thank you, Chair.

Thank you, Jamaica. And I think to some of your clarification or issues that you raise, I think we're here to listen to that today. So, you know, that from what I've heard and from what I've been taking part in the issues note, I think we are trying to look forward to a multilateral solution to these issues. But then again, you know, we are here to listen to what delegates think about this. So that would be at least from the work streams co-lead points of view. And I also think that regarding digital service taxes, and we heard some other interventions on that, I think We do need a solution for all services, um, and, you know, these are unilateral so far as, um, taxes, and, uh, we want to try and come up with solutions for the, you know, the world we live in today, so I think we have to look at those, uh, taxes as well.

Thank you very much, Chairman. Thank you to the co-leads of Work Stream 2 as well for this issues note, which I think is a good foundation. I'd like initially to make a few more general comments on it. I'd like to recall that tax sovereignty is clearly primarily and foremost the remittive state and all are free to access the source. We believe that there is a problem only for countries who have large scale conventional networks because it's therefore possible to tax all services at source. To take the French system, if you look at the general system of the general code for French taxation, services are taxed at source for all activities on flows in France on the conventional basis. That's no surprise. In any instance, national law allows that quite properly. Secondly, there are already models which exist, models not rules as such. But these can become rules when states come to a bilateral agreement to implement them. So rules do already exist. This isn't how France had envisaged this exercise. In our view, there may not be a need to take a look at all of the rules which exist today and to and those related to physical presence to see whether a state has an effective right to taxation or not. We know that in some business models there are existing rules and we're free to try these and to respond to these using models which may not already exist but to start to think outside of the box. That's how we've approached this exercise, looking at all of the principles which were on the screen today and looking at how this can serve as a foundation to reflect on this together. Thank you.

Thank you. Thank you, delegate of Norway.

Thank you, Chair, and thank you to the co-lead and the secretariat and also the participants in the workstream for all the work put into drafting this issues note. I will not repeat our written input because that's available for everyone to see. We have a few preliminary remarks. respect to the slide on the screen here, I think the ultimate goal of this exercise, both for this protocol and the framework convention, is to support domestic resource mobilization. To that end, there is not a competition between this goal and the need of the goals of eliminate barriers to cross-border trade and investment. in order to be aligned with economic efficiency and assure tax neutrality. These are all issues that need to be there to support domestic resource mobilization. So I think that would be our starting point. We fully recognize the differences in approaches between different countries and the different levels of capacity. However, it is our view that the current standards of requiring physical presence, it works quite well when it comes to traditional business models. One could also say that it enhances simplicity and administrability by requiring a threshold before you are seen as engaging in a economy at a level that requires taxation in both source and resident states. But we also recognize that this is not the view of all. So going forward, we expect that there will be many different suggestions on both with respect to nexus and mode of taxation. We think there is a need to explore maybe differentiating between different types of services. And also, given that the stark difference between net taxation and gross-based taxation when it comes to impact on cross-border trade and investment, and thereby to support the goal of domestic resource mobilization, we think it's fundamental that we also engaged in an assessment of the economic impact the different options on the table will have, so that we are quite sure that they will in fact support the goal we are trying to achieve here. So, to conclude, we think this might be missing from the draft issues note, and we hope to see it in any future notes going forward. Thank you.

Yeah. Thank you, Chair.

These are our preliminary remarks and we hope to continue and to contribute to the discussions ahead. At this stage, we would like to submit that currently the taxation of income from cross-border services is largely based on physical nexus. However, in today's digital economy, this principle often fails to capture value generation, leading to significant tax challenges. And due to differences in taxation norms between developed and developing countries because of variances in capital flows, cross-border taxations face the risk of double taxation. Allocation rules remain inadequate with regard to the taxation of cross-border services. And one of the prominent legal barriers to tax income from cross-border services is also the conceptual ambiguity in the definition of services. The definition of services is often not all inclusive for tax purposes and remains insufficient for several reasons. We have separate provisions for specific types of services. For example, Article 12 on technical services, Article 14 on independent personal services and Article 12 be on automated digital services with distinct definitions and thresholds. When we are dealing with such a varied definition of services, issue may arise in situations. For instance, is a cloud-based IT consulting platform covered under technical services or automated services or professional services if the platform involves human input? And when there is lack of clarity on whether a payment is for a service, royalty or another category, for example, cost reimbursement, MNEs may choose the characterization that results in the favorable tax liability. For example, a fee for digital services could be misclassified as a royalty to take advantage of lower withholding tax rates under a tax treaty. So without a single cohesive tax definition, taxpayers and tax authorities face uncertainty when classifying cross-border transactions. Such ambiguity undermines the predictability and administrative workability of the treaty rules. We also need to realize that the current sourcing rules often link taxation to where the service is performed or where the service provider is located. or where the payment is made as consideration of services. However, it is important to consider here that digital services may also derive substantial value from the jurisdiction where users are located, that is the demand side, even if no service is performed there in the traditional sense. And this is what could be perceived in the slides which were part of the technical discussion. There is a growing importance of user participation, data contribution and network effects in value creation. However, the economic activities performed by the entities providing the digital services may not be discounted. A more modern approach would focus on economic activity and value creation while balancing the significance of economic activities performed by various entities in the value chain to enable fair allocation of taxing rights among jurisdictions. And it is important the definitions laid down by the protocol reflect the importance of real economic substance and value creation to enable fair allocation of taxing rights among jurisdictions. Thank you.

Thank you. Distinguished representative of ADF.

Thank you, Chair, for giving us the floor. We want to appreciate the Chair and the colleagues for the very insightful issue notes developed, and also for members for their comments in this direction. We want to identify also with the comments made by Kenya on behalf of the African group. and before Kenya, the comments made by Ghana on behalf of our members. Chair, ATAf is happy to be part of this work stream and we want to emphasize that taxation of cross-border services represent one of the greatest challenge for our members in this generation. We also believe that effective taxation of cross-border services will lead to significant availability of funds for development in our jurisdictions. To this extent, we note the use of intra-group services in shifting profit from our jurisdiction to other jurisdictions, and also the significant role it plays in illicit financial flows. We appreciate members for rightfully recognizing that the extant rules for taxation of services does not lead for effective taxation of cross-border services. And in that sense, Chair, we are calling for the workstream to ensure that the scope of this work is broad enough to cover both traditional services and digital services. And within that scope, Chair, we want a situation where focus is placed on taxation of income and other as against other element or rules which may not really be relating to taxation of income or its equivalent. And in that sense, we highlight specifically digital service taxes, especially some designs which seem to mirror indirect taxes as against income taxation. Chair, we also want that effort be made within the rule to one, enhance the extant rules which works. And when we say that, we're referencing in particular withholding taxes. Complaints have been made that it could lead to over taxation. How do we make that work more effectively for everyone? And in the other sense, for the places where it does not work, what room must be developed? How do we ensure that there's new nexus for taxation of digital services? nexus that may be based on agreeable baselines. We have some rules like significant economic presence, which could be considered. But, Chair, we are also calling for members to maintain broad mind with respect to the design and element of this taxation. And in that sense, we are emphasizing that whatever solution that must be arrived by the committee or the work stream should include some treaty-based solutions which must deal away with the fiscal nexus as requirement for taxation of services. We will also call for members to be bold and innovative in their approaches because this is an opportunity to right the existing wrongs. If we need to revisit the transfer pricing rules, which have been highlighted by members as a problem in terms of finding comparability and other data-related problems, we should visit it. If we need to develop as part of the deliverable of these work streams an FTI-inspired instrument which will amend existing treaties and ensure that services are taxed effectively, we should not be scared to do that. Chair, on those comments, we want to assure members that we are here to work constructively with members to ensure that we reach a balanced and broadly acceptable rules for taxation of cross-border services, especially in the context of digitalized and globalized economy. We thank you, Chair.

Thank you. Okay, so now we have some requests for the floor from Nigeria, Ghana, Netherlands, and the U.E. And we are left with just a couple of minutes to the end of this session, and we will lose interpretation, and now Saudi Arabia also. So now we're going to close the session, and we're going to give the floor in this order to the member states following the lunch break, in addition to some requests from the multi-stakeholders who will follow the member states. So now, it's we finish and we close this session and wish you a good lunch break, and we will convene again here at 3:00 to resume the floor. Thank you all.