(4th meeting) Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation

Good afternoon, everyone. The fourth meeting of the Committee is called to order.

The Committee will continue its consideration of Agenda Item 4 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 the Protocol 2 on the selection of the subject of Protocol 2. Now we're going to continue the list of speakers that we have since the morning session. The floor.

The floor to the distinguished Legate of Netherlands.

Thank you very much, Mr. Chairman. First of all, coming back to the discussion of this morning, we appreciate that we will go and have that explanatory paper from the Secretariat on the different topics for the second protocol. I felt a little bit uneasy this morning that we were discussing the choice between the substance between the topics without knowing what that paper would say and whether that paper would shed any new light on the topics that we see because there is some uncertainty of what the topics mean. I think this morning we have heard that there is some uncertainty of whether the countering illicit financial flows entails exchange of information. Yes or no.

But on the whole I do sympathize with the interventions by the distinguished members of Nigeria, Ghana and India that we tax people. We know when there is a subject with the titles of the subjects. We know what is meant by this, what the problems some of our member states encounter with that topic and what the solutions is they envisage. So having that in mind, we are ready to express a preference for one of the subjects for the second protocol.

We would certainly oppose to having the second protocol dealing with the digital economy. We think that duplicates the work that is already going will be going on on the first protocol on cross Border services. And also we think it duplicates the work that has been done or is being done in other fora on the other three topics. We are flexible, they're all important issues. But we think we share many of the interventions before the lunch break that the most promising one would be the one on dispute prevention and dispute resolution.

I think that's in the interest of all of us, interest of most stakeholders. So we think we should pick up that, although we must say preempting the discussions we'll be having on that subject and curious to see what the Secretariat's paper says on that. One of the key Issues of dispute resolution will be the issue of arbitration. And we, we know in advance that there's going to be different positions on that. But even taking that in mind, our preference would be to dedicate the second protocol to the issue of dispute prevention and dispute resolution.

And we are looking forward to the paper of the Secretariat. Thank you very much.

Thank you, distinguished delegate of Saudi Arabia.

Thank you. Thank you, Chair. We look forward to receive the paper as you highlighted. But in the meantime, I see that there is an overwhelming support for the second protocol to be in dispute prevention and resolution. And I think initially we can say we are okay with that, but we will give our final position once we receive the paper.

Thank you.

Thank you. Thank you, Delegate of Colombia.

Thank you, Chair.

My delegation believes that the conversation has been very useful, very substantive, and there are many valid points that we will report back to make a final stance on this. I just want to maybe respond to a couple of issues that were related to the protocol that we are advocating for. I think there were comments by some delegations indicating that high network individuals, a protocol on this issue would be too related to exchange of information protocol, which is something that as of now is listed as, as a protocol for the future.

Just to indicate that that would not prevent us in any way to discuss this issue if we were to decide on, for example, high network individuals, all or illicit financial flows. I think the Committee will be in the capacity to come to a conclusion on that protocol being relevant or not for the future, assessing what has been developed. I think as of now, for example, we are coming to, it seems to be a conclusion that, for example, a protocol in digital economy will be duplicative of what we have in the protocol one already. So a similar conclusion could be easily reached if we were to, for example, develop an IFFS protocol or a high network individual protocol that happened to have enough provisions on exchange of information, and therefore maybe an exchange of information protocol for the future is not any longer necessary. So just to say that does not prevent us to work in that.

And that actually elevates the notion that there are many interrelations in the protocols to be discussed. And a good argument to also consider one of them could be in its substance, how much are we able to cover to serve different purposes. So, for example, in the context of developing an elicit financial flows protocol, we will be able to more probably, most probably include enabling conditions and provisions, such as, for example, a global registry on assets that could serve many purposes, not only listed financial flows. And I think that's worthwhile to consider. That being said, I heard also a lot of voices leaning towards dispute resolution.

And this is very interesting to see because we had this discussion during the TORs and at that point for some, and there was an indication that it was no clear what we were trying to address in this context. But now it seems that clarity has appeared and there is appetite for it. That's very fair for the perspective of my delegation, at least. What we indicated at that point is that it seemed such a basic issue, and it has been presented by some here too, related to the core of the Framework Convention to enable international tax cooperation, that even those provisions should be contained in the Framework Convention as such. And that was something that we suggested at the point.

And we would even raise the question if this being that important, is that something that should be considered in that sense? Or at least consider that if we are to sign the Framework Convention, then it will be a high expectation to also sign this particular protocol. That is an open question. But of course we are going to go back and see if this is something that really create convergence about the decision on the second protocol. I think this is a very valid and strong argument to consider.

But then this brings me to my third and final point. It will be very important to whatever. I mean, regardless the decision we make here, we all come to an agreement on safeguarding those issues that were part of the list as an early protocol that will not be developed now, so that they remain on the table as relevant issues to be developed as protocols in the future. So whatever decision we make now, it doesn't mean that we will not be working on the other issues that we have already identified as very relevant in the future. And I think that in order to all come to an agreement, such a safeguard will be really important.

Thank you, Chair.

Thank you. And thanks. Delegate of Parazine

thank you, Chair. Brazil believes that early protocols are essential to achieve concrete and effective results through this Convention, in line with the commitment set in the terms of reference. So we will remain open to listening to members priorities and seeking to identify a protocol topic that commands substantial support across members. We also remain open to discussing substantial aspects of protocols that should be designed to benefit all. And considering that persistent economic inequality and the concentration of income and wealth, it's a main challenge.

We believe we should advance on national initiatives to make sure that the wealthiest will contribute their fair share in taxes. And we consider that we can achieve concrete results in the next years. That being said, our priority remains addressing tax evasion and avoidance by high net worth individuals as a second Protocol and we recognize that much progress has been made in an international tax code cooperation in relation to multinational corporations, leaving measures targeted at high net worth individuals unaddressed. So this protocol would be crucial to design progressive tax systems, reinforcing national reforms and promoting sustainable growth. For example, as a first step, this protocol could include fostering discussions on tax principles, exchanging backs, best practices, establishing and enhancing assets registries, exchanging information and designing anti avoidance mechanisms.

Finally, we'd like to advance on the discussion about possible scope for protocols in order to find a common approach and feasible instruments regarding the time frame of this negotiation. Thank you.

Thank you, Distinguished delegate of Korea.

Thank you. Mr. Chair. With regard to second protocol, I believe that prevention and resolution of tax dispute a crucial topic for discussion. Given the growing emphasis on international cooperation

in tax dispute resolution, it is important to approach this issue in a way that complement existing international standard while maintaining coherence with them. Thank you.

Thank you. Thanks. Director of Fiji.

Thank you. Thank you. Mr. Chair. Good afternoon.

Good afternoon to all colleagues. Very much for Fiji. What we would have wanted to say had been expressed by the statement of Fiji's read by my permanent representative yesterday, which more or less stipulates what really the priorities for Fiji in as far as this question is concerned. Having observed what transpired before this afternoon, it's quite clear that the views in the room are more or less diverse with respect to the preferences that we have for protocol number two. But in any way, we have also noted with keen interest the priorities of some which may differ from our view with respect to a number of things.

Even though we noted that digital is quite significant, but we also noted that the digital gaps between our countries within and between is very much diverse. And this could potentially provide lots of confusion with respect to implementation, that we would want to drive it in as much as the potential and the utility that comes with it. The second, in terms of the reasoning that we have provided in terms of protocol number two that we would want with respect to addressing tax evasion, it actually comes from the development lens. We note the limitations that we have had not only as small island states respect to developing countries as a whole, most of us, we are looking at tax evasion or illicit flows and opportunity whereby we need to redirect to provide the level of investment potential opportunities that we could have for much needed finances that we need for our development. So this is basically where we are coming from with respect to driving at the priorities that we would want with respect to protocol number two is not coming for the sake of just coming.

Something that's more simple that we could achieve, but at the same time as well, what's the return of investment of our time here in New York, Even though it may be delay, but there are meaningful progress that will culminate as the result. Speaking of the development that we anticipate with respect to the real implications that, you know, the Protocol 2 will be able to bring about with respect to our development trajectories. So that's basically, you know, the reason behind a priority when we're looking at addressing tax evasion. When you're looking at, I hope that the Secretary, with respect to the analysis that you provide, they'll be able to come up with some sorts of, you know, what are the monetary value as the result of, you know, tax avoidance or illegal transfers. They're able to provide, you know, that level of clarity so that we know because we're actually here to address tax evasion or illegal transfers.

So what really are those elements that we need to be able to construct or understand? They'll be able to provide some level of understanding with respect to our choices. Not really something that would be just easy to be able to achieve at the end of the exercise. Because what we see as far as addressing tax evasion, we are talking about high net worth individuals and also we are talking about it's actually from small island states. It's very difficult to be able to address that.

So what are the governance mechanism umbrella that we'll be able to create through this UN forum that be able to address those, to be able to enhance our capacities down the line. And also we are talking about the complexity of the administration. They are interconnected and most of our countries are actually involved. But we really need to be able to take this down, to be able to track them down in such a manner comprehensively if we could otherwise, you know, to have some form of mechanism. And also if we look at the amount of tax revenue potentially at stake, this is something that we need to be able to understand once we're able to mark down all the priorities that we have.

There are actually potential revenues in some compared to some. And we also need to be able to have that level of understanding with respect to our priority in this case. And finally, I think even if you look at the opportunity undertake the aggressive nature of some of these tax planning evasion in nature is basically, you know, draws down to some of these. You know, if you look into addressing tax evasion and even measures against tax on illicit financial flows, they are more or less comparatively we could say, but you know, Even as I said from the development angle that we are coming at what we could get back as a result of, you know, having this framework in place is basically, you know, addressing tax evasion, even coming to measures against tax related illicit financial flows. Those are actually more or less the two priorities that we have bearing in mind the potential opportunities that they could create when we redivert these funds or when we able to close this gap in view of the economy as a whole.

In that regard. Thank you, Mr. Chair.

Thank you. Distinguished for Hungary.

Thank you, Mr. Chair. Thank you also for proposing the background material. We will look into that. We are looking forward to analyzing and we have been listening to other delegations this morning and we agree that we should be realistic and consider also the time constraints and we agree that maybe having a good feel or gut feeling, the dispute resolution could be one of the topics which could be less controversial.

So for this reason we think that we could further elaborate on this topic to under prevention and resolution of tax dispute. And we also emphasize anyway that we need detailed analysis, scoping and also impact assessment in advance before going farther. Thank you. Thank you. Of Philippines.

Thank you. Thank you. Mr. Chair, I I'm coming in after what Colombia has said and I aligned with what Colombia has actually explained about the exchange of information.

As was discussed already this morning and also raised by other delegations, we are choosing based on what protocol may require exchange of information or not. Now, my understanding is that all of these protocols to some extent would have part of it exchange of information as part of implementation. And it doesn't mean that this protocols, because it would have it would entail exchange of information. It does not merit the urgency to come up with the early protocol. Having said that, we believe that going back to the discussion, the tor when we were choosing what early protocols we would want to negotiate along with the convention is that it's based on their urgency.

Now, that is the criteria for the Philippines in choosing the second protocol. It is based on the urgency among the list of protocols in item 16. We believe that what is more urgent among them is the one that is causing loss of resources in most of the developing countries. And when we choose our second protocol, we have to consider the impact of it. Which one would have more impact rather than which one has less complication or which one is difficult to negotiate.

Now with this, we believe that the illicit financial flows merits the negotiations for an early protocol because the essence of coming up with an early protocol is because it's an urgent issue. The prevention and dispute resolution we believe is A tool to ensure implementation of protocols which we wouldn't be able actually to discuss about it if we don't have the substantive protocols to start with. And if we are going to have a good substantive protocols, then it would help or inform the negotiations for the dispute settlement or prevention of tax dispute issues. So those are the two things that I just want to convey here about the exchange of informations and the sense of urgency that I believe we should always take into consideration as it was when we were negotiating for the Tor. Thank you.

Thank you. To the distinguished delegate of Lebanon.

Thank you. Thank you, Mr. Chair. First, as it's the first time I'm speaking during the session, I would like to congratulate you for your appointment and the members of the Bureau also. And I would just like to share the position of my delegation and let's say the preliminary choice because the paper on the four options, subjects or proposed subjects were just.

That was just shared like 10 minutes ago. I was just starting to read it. I would like to say that in line with the terms of reference and what was just shared today by many member states, my delegation is flexible when it comes to the topic, the subject of the second protocol. But we would like also to say that choosing the subject on prevention and resolution of tax dispute is also. Is not only less controversial than the other options, but can have a merit because it can help in the implementation of the Framework Convention.

And also at the same time it can be because in every new legal instrument we will have always an article or a part section about setting dispute settlement. So it can be very beneficial for the discussions later for the Framework Convention to have a protocol on this. And as it was shared by main delegation when it comes to the also the benefit of having this protocol, this topic. But it's only our preliminary option for now because we need to consult with capital. According to the paper that was just circulated like 10 minutes ago.

And in line with this idea, I would just like to raise a point that was tackled during the discussions Under Agenda Item 3. It was proposed by Singapore and also supported by Jamaica about the idea of having this technical business Advisory Council to be here to support Member States, just advisory for like to have information and exchange of information and to provide insights on tax matters. And thank you again, Mr. Chair.

Thank you. So I don't have any other requests for the floor. So I think that we are gonna close this afternoon meeting and just to keep everyone aware about how things are working, after this meeting, the Peru will convene again to continue the discussion of the decision making and hopefully we will be able to to reach to a good proposal to be presented tomorrow in the floor.

But anyway, based I think on the conclusion of the pro meeting today, maybe there will be some changes to tomorrow's schedule that will be circulated tonight immediately after we finish finish the hero meeting. So just give you updated and aware of how things can can move. But then now tomorrow's schedule is the same but based on what the different scenarios. So maybe under some scenarios we will circulate some changes to tomorrow's schedule before I join the meeting. I see request from Brazil.

So Brazil floor is yours.

Yeah, My. My question was in line with what you said. I mean what. What are you going to do tomorrow in the morning? What we are going to discuss the

services or the topic of the services protocol or what? I mean is there any specific item in the agenda for tomorrow morning?

Okay. Again I would like to clarify that based on what we will reach today. So if the bureau were able to reach a proposal on the decision making, it would be tomorrow discussion on decision making and will represent the proposal and maybe we will discuss also the stakeholder proposals. So this is how it will look if we didn't reach. Hopefully not.

But if we didn't reach a conclusion, that means almost recirculate something to convert tomorrow meetings to be like informal. Informal. So we can have more better way of discussion and maybe you can have some smaller groups of discussions so we can reach a conclusion. Because we are left only with tomorrow that we need to conclude about decision making and the protocols. Protocols.

I see that we have like almost good mutual understanding, some different views. But again I think everyone is flexible and we can absorb this easily. So we are well advanced with the second protocol but still a little bit behind with decision making. So that's why I'm saying based on the conclusion of of the outcome of the pro meeting today, we will start at 4 or 4:15 maximum. Just if we.

If someone need to have to grab a cafe or something like this. So we will start at 4:15 and we'll keep going till to reach something officially 6 o'. Clock. But as everyone knows sometimes we stay till 7 8. But so this.

This is the summary of. Of what different scenarios that may happen. Anyway, if any change we're going to circulate and note this line. Okay.

Okay. So the committee has thus concluded this stage of its consideration of agenda item 4. So the meeting is adjourned. Thank you.