Third Session of the Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation

Welcome back everybody, please take your seats. We will continue the discussion of Article 6. We have a few flags from member states remaining and then we will move on to stakeholders. Daniel, please.

Good afternoon everybody and welcome back from lunch. We'll move straight into business, so we invite Nigeria to give their comments.

Thank you very much, Chair, for the opportunity again. And thanks to colleagues, I think we have had a very interesting and robust discussion. However, Chair, I am concerned that we are dissipating energy And this is my view in the wrong direction. I'm not sure the discussion we should be having is the effectiveness or non-effectiveness of any existing framework. And instead, we should be focusing on the mandate of this Intergovernmental Negotiating Committee. And Chair, if you permit me to refer you to the commitment section under the terms of reference in paragraph 10, which listed all the commitments. And with your permission, I will read the opening phrase of that commitment, which says the framework convention should include commitments to achieve its objectives, commitments on the following subjects into idea should be a fair allocation. And then when you go down to paragraph D, uh, you see effective mutual administrative assistance in tax matters, including with respect to transparency and exchange of information for tax purposes. And so what we have, Chair, is a mandate for this committee to include in the framework convention a commitment for effective mutual administrative assistance in tax matters, including tax transparency and exchange of information for tax purposes. So there should be no debate, in my view, as to whether or not adequacies should be in the convention. It is already there by the terms of reference. Now, whether we do not agree or agree with the current draft is a different discussion. And I think that is what our energy should be to say, how do we draft this commitment in a way that captures the objectives that is intended? The argument as to we have a forum, we don't have a forum, it is effective, it's not effective, we are just wasting resources and time. And so I want to submit, Chair, that if we do not agree with the current draft, can we produce another draft? But whether or not we should have this commitment, it is a must based on the TOR that is guiding the operations of this committee. Thank you, Chair.

Thank you, Nigeria. Norway, please.

Thank you, thank you a lot. Thank you, co-leads. It's the first time we're taking the word on this issue, but let me therefore just start with thanking the co-leads for all the hard work that has gone into preparing the article in the draft template. I'll follow up by saying that we agree, as expressed by Ghana indirectly, other that mutual administrative assistance is a cornerstone of international tax cooperation. And we do think that exchange from information has a place in these discussions and in the framework convention. From our perspective, it is important to ensure that if chase and makes it works for all, and we are committed to that. On a slight note, Let's just add that we also agree with those that have suggested that language on exchange of information should be in one place with possible cross references to that commitment as relevant. I think we'll also follow up by saying that as we have heard from Switzerland, Mexico, Peru and several other delegations, we are also of the view that it's necessary to take into account and build on the existing framework. From our perspective, much efforts and resources have been put into development of those instruments and standards, and we are among those countries that are highly dependent on that, uh, to enforce our domestic tax law. That said, um, we, uh, noted and we agree with Jamaica, as far as we understood and others, that it's important that we try to identify and address gaps, and, uh, as such, at least, and… We will here only speak for ourselves, of course, but we believe that it might be beneficial to get a better understanding of those gaps so that we might address them, and we'd be hopeful that maybe some work can be done there or that could be clarified for us. Of course, as Bahamas and India and Brazil, as we interpreted them, and of course several others have pointed out, capacity building is also vital. And we hear those voices that said it says that we need to do more and we're happy with that and we're also content with a separate commitment on capacity building in Article 11. I have some minor language comments but let's just start with also saying that of course going back exchange of information is fundamental for international tax cooperation that is perhaps evident. But similarly, it's also evident for us that it requires guardrails. And these are important for us to ensure a fundamental trust between our taxpayers and our government. And we need guardrails under which circumstances one can exchange information, how that may be used, the relevance of the data, but also with regards to confidentiality. And for us, it's important to have that at the same level as existing standards. As such, we do have some concerns with the drafting of paragraph three, and we do believe that some work to be done there, and we might get back to that later on in the written comments, but certainly, yeah. On paragraph one, a small drafting sentence there, last sentence, It does seem a bit too prescriptive and a bit arbitrary, listing all the expensive profits, taxes paid, et cetera, et cetera. So from our perspective, it might be a good idea to have a look at that. Similarly, on paragraph two, and I think India was somehow referring to this, but I won't say that was the exact Same point. We looked at the word eliminate administrative barriers, and certainly we do think that it should be a pursuit, it should be a goal to reduce administrative barriers, but we have some doubts whether it's possible at all to eliminate all administrative barriers. And that might perhaps be a way forward. So we would just ask for that to be taken into consideration. Thank you.

Thank you, Norway. Um, before I go on, there's a question I was asking someone during the break. There's been a lot of issues about capacity. Now, maybe if we could expand on this, not for Norway, but generally everybody. Whether we are talking about skills, we are talking about financial resources, we are talking about logistics. I want to say capacity, we are talking about everything. It'll be good to know exactly what capacity is needed and then it will help the discussion. So thank you. We have the United Republic of Tanzania, please.

Thank you, Chair. Chair, the United Republic of Tanzania aligns with interventions and the suggestions made by Zambia on behalf of the African group, and we wish to emphasize the following key points. First, on paragraph one, we call for the widest possible measure of mutual administrative assistance in all tax matters, as proposed by the ALDE Group. The current text omits important tools such as mutual tax examinations and tax examinations abroad, which are essential for effectively addressing complex cross-border tax avoidance schemes. On paragraph two, We support explicitly outlining comprehensive forms of cooperation, including exchange of information, assistance in collection, simultaneous and cross-border tax examinations, service of documents and any additional forms as may be determined by the conference of the parties. This broader formulation ensures future relevance, particularly in light of digitalisation, Broader formulation ensures the emergence of new financial instruments and the growing mobility of cross-border wealth, all of which demand adaptable cooperation mechanisms. On paragraph three, Chair, we support provisions aimed at eliminating administrative barriers and incorporating capacity considerations. And on paragraph four, we support empowering the confidence of parties. to provide guidance on additional safeguards, thereby ensuring consistency and trust in handling of shared information. Additionally, Chair, we support the inclusion of paragraph five to provide flexibility for the confidence of the parties to update modalities as needed, ensuring the convention remains relevant, adaptive and responsive to future developments in international tax cooperation. Thank you, Chair.

Thank you, Tanzania. Portugal, please.

Thank you, Mr. Koelitz. I would like to take the floor especially to react, positive react, to what has been said by our colleague from Nigeria in respect of the necessity of us having an Article 6, or at least a commitment in respect of mutual administrative assistance in the framework convention. That part I agree entirely with Nigeria, not just because it is stated on the terms of reference, but because we believe that mutual administrative assistance is something that is at the heart of international tax cooperation. Since the beginning, we believe that we have to pay some attention to this dimension since it is probably one of the best avenues that we have in front of us to reach our objectives in respect of each of jurisdictions be capable and able to fulfill their tax policies. That said, I have to confess that the drafting of this article is not yet enough to dissipate some doubts that we have in front of us since the beginning of this discussion. In fact, we don't know if what we are here establishing is a form of overcome the current standards and structures that we have in place. to achieve this mutual administrative assistance among tax administrations, or if we are trying to update or enhance what we already achieved. And this doubt is for us critical, since we have spent too much resources, sweat and labour to reach a status where we can apply some standards. be up to the safeguards that it demands and do it knowing that we are acting, our tax administrations are acting under a legitimacy code. That is quite important since we are talking, for instance, when we are talking about exchange of information for tax matters, we are talking about the exchange and share of data that is protected by personal data, that is protected by the confidentiality that is attained to tax matters, and all of these dimensions are being syndicated by courts. And nowadays we have a structure that gives us enough security in respect of that. Until it is like that, we would like to keep the ability to fulfil the commitment and also keep our participation in these structures. that are, fairly enough, participated by almost all of us here. This is somehow a general comment. Another comment in relation to the article, I would say that I believe that France already described it perfectly. It is, in fact, too detailed to be a commitment, but not enough detail to be a rule. And this is a conundrum that is affecting the article in general. Probably we will keep some opportunity to have some more precise comments related, relate in relation to drafting through our written comments. Thank you.

Thank you, Portugal. Ireland, please.

Thank you very much, Chair. We'd like to align ourselves with the comments made by a number of countries, including France, UK, Austria, Estonia, Japan, Korea, and others. We firmly agree on the need for this commitment and the importance of its place in the Framework Convention. However, we need to be clear in our drafting here whether or not we are envisaging improving and enhancing existing standards or whether we are trying to design a completely new process. We believe that time would be better focused on addressing the concerns and problems raised with existing mechanisms and enhancing and improving matters through these commitments. We believe that similar problems and issues will arise in designing a new system and establishing the specific safeguards that would be necessary for jurisdictions to sign up to such an approach. It's not clear to us that the benefits from starting afresh would outweigh the costs envisaged in establishing such a new framework. On the text itself, I think we need to remain cognisant of the ability of tax authorities to utilise and benefit from information provided and ensure that the focus of these exchanges remains on that information that is foreseeably relevant for tax purposes. The list of information set out in paragraph one seems very similar to what's set out in Article eight of the draft framework convention, and it also significantly overlaps with what's contained in the MAAC, et cetera. So we agree with the calls of others to try and simplify that language as much as possible. Thank you, Chair.

Thank you, Ireland. United Arab Emirates.

Thank you, Chair. Regarding paragraph one, we agree with others that the scope is vague. We need to define the scope and include the definition of what we mean by widest measure. More generally, this article makes multiple references to EOI. We support the view that this could be moved to the exchange of information article. We also agree with Saudi Arabia, Japan, and others that the references to confidentiality should not be restricted to Articles 5 and 6. This should be extended to other articles also. Finally, we also echo the comments made regarding the duplication of work of other forums and agree that we should fully understand the gaps in the current standards with the aim to address these.

Thank you.

Thank you, UAE. Islamic Republic of Iran, please.

Thank you, Mr. Chair. Good afternoon, dear colleagues. In light of Article 6, we believe that the wording of this article can place a stronger emphasis on capacity building. We suggest that Article 6 be explicitly linked to Article 11 so that capacity building and technical assistance are clearly recognized as an integral component of effective administrative cooperation. We agree with the suggestion of the other colleagues to establish a fund dedicated to capacity building or information exchange platforms. However, the funding process should be transparent, fair, and entirely free from the politicizing or unilateral coercive measures. Thank you.

Thank you, Iran. I just want to make a little clarification before we go on. I've had references to EOI being moved into the EOI section in the framework convention. But that section has to do with information for implementation of the convention, not other things. So fine, if we are saying that there should be EOI as a separate article, that, I mean, is something which we want to do, but it will not fit within the confines of what we have currently. It might have to be quite a separate article. I just want to make that clarification for all of us. So I'm not saying that we can't have the suggestion for a separate article. But then that article will not be what we have currently in the framework. Now, I think we can move to the stakeholders now, and we'll start with the African Union.

Thank you, Chair, for giving us the floor. The African Union notes the immense importance of mutual administrative assistance in tax matters in international tax cooperation. This is more so given the rapid digitization and globalization of the global economy. Chair, the question then becomes, as a result of this importance, the UN General Assembly in its resolution have indicated that we must have article on mutual administrative assistance. And as aptly raised by Nigeria, What we should now be talking about is how do we make the current language work for everyone? In this regard, Chair, we believe that the amendments supplied by the delegate from Zambia on behalf of the African group meets both the spirit and aspiration of this particular article. And we call on members to have a closer look at that proposal. We also want to quickly state With respect to some issues which have been raised, we agree with Kenya that their existing platform and registration in that platform do not necessarily amount to benefit. This is evidenced by the fact that most of the members who are currently in the room and calling for this article are also members of the Global Forum. Another fact that also follows is the fact that most of our members from the continent, a whole lot of them, do not belong to Global Forum. At the question then becomes, is the existing framework working for all? In our own understanding, we think that most it's working for some, but not for all. Our mandate here is to found a platform to find a process that works for all members of the UN, or at least parties to the convention, as the case may be. Chair, in that respect, we want to quickly also respond to the issues raised by the UK. as to what will be the ambition and aspiration of the entire article, as it were. In our understanding, this article raises an obligation using a very high level proposal. That proposal, if you ask us, can be made in different ways. It can be made by implementing the existing framework standard, including the standard which we have in the MAC. It may entail maybe reviewing the MHC, ensuring that the standard applies more evenly and to the benefit of all. It may also intend the conference of parties, which will involve our sovereigns coming together to develop new standard if it is deemed necessary, or taking other such measures as may be required to ensure that there is effective mutual administrative assistance in tax matters that benefit all parties. We thank you, Chair.

Thank you. Ataf, please.

Thank you, Chair. We'd like to align ourselves with the comments made by Zambia on behalf of the Africa Group. And we believe that the wording proposed by Zambia seeks to highlight the importance of this article as it is included in the terms of reference. For our members, this is a particularly important article as some of the challenges that have been raised in other fora, we aim to address them in this article. At the same time, Chair, we believe that existing frameworks and platforms can be improved in the spirit of this article, and therefore there is no need to duplicate, but rather to enforce the inclusion of this article and so that where our members challenges have been evidenced, those existing platforms can either address those and as said by my colleague from the African Union, if needed, the conference of parties can come in and develop new standards. We thank you, Chair.

Thank you. ILO, please.

I'm sorry, I think we didn't request the floor, so I don't know why we are in the list. I'm so sorry.

FEMNET, please.

Thank you, Chair. I speak on behalf of the African Women's Development and Communications Network, FEMNET, and the Africa CSOs Working Group on the UN Tax Convention. Distinguished delegates, exchange of information is one of the cornerstones of international tax cooperation. Without effective exchange of information, we cannot deliver on the commitment of fair allocation of taxing rights or the commitment on sustainable development, particularly the sustainable development goal five on gender equality. The current standards on exchange of information and automatic exchange of information simply do not work. While other fora, such as the global forum, may boast a high membership, their standards remain ineffective. In 2022, only four African countries were able to implement country-by-country reporting fully. Only four African countries accounted for 84% of all exchange of information requests sent in 2023. In the same year, only five African countries had managed to carry out automatic exchange of information. After a decade of capacity building, two things have become clear. Even for countries that are able to adhere to current Current exchange of information standards, particularly automatic exchange of information, they still a lack of reciprocity, making this measure ineffective despite considerable investment in financial and human resources. Implementing common reporting standards among other standards has been very costly for global south countries, indicating power imbalances which include an even bilateral and multilateral exchange relationships, legal and data protection constraints, and risks that information flows unilateral to wealthier jurisdictions without reciprocal benefits. We need solutions beyond capacity support. The failure of countries to access information on taxpayers limits their ability to effectively tax and thus not only takes away from their ability to finance public services, but also translates the burden to women and other structurally marginalized groups who disproportionately bear the care work burden when governments fail to finance public services. We strongly recommend that states take a bold step and employ a feminist approach to effective automatic exchange of information in Article 6. The feminist approach would ensure transparency and fairness in the ways that information is shared, how compliance is enforced, and whose power and interests are centered. It would involve recognizing the different capacities of global south countries and allowing them to receive information on a non-reciprocal basis as they make efforts towards investing in transformative frameworks. Additionally, Article 6 should allow for the transfer of technology at no cost towards global south countries that are particularly the least developed. The information The application of special and differential treatment and the imposition of grace periods for global south countries is critical. This will ensure that there is no restoration of power, there is no, that there is a restoration of balance in power dynamics, of exchange of information, and will ensure that automatic exchange of information actually works for global south countries. This must go hand in hand with efforts to ensure that revenue raised is channeled towards investing in gender responsive public services and transformative care systems. Thank you.

Thank you. Global Impact, please.

Thank you, Chair. Good afternoon, distinguished delegates. I am speaking on behalf of Open Ownership, an NGO that supports governments across the world implementing beneficial ownership transparency reforms, the African CSO Working Group on UN Tax Convention, and the Global Alliance for Tax Justice. Thank you for this opportunity to speak. We welcome the ambitious objectives set in the terms of reference adopted by the General Assembly. We want to emphasize that the solutions in the convention need to match this level of ambition. The urgent problems that the terms of reference are trying to tackle require bold solutions. And we call on member states to be as specific and ambitious as possible with respect to these solutions in the convention itself. We echo the calls of the member states to introduce a specific article with respect to transparency and the exchange of information. and propose either broadening the scope of Article 6 in line with paragraph 10 from the terms of reference and change the title and scope of the article to mutual administrative assistance, including transparency and exchange of information, or introducing a new article to specifically capture solutions around transparency and the exchange of information. We also welcome the comments from various member states reminding us the outcome of the document reminding us of the outcome document of the fourth international conference on financing for development, the Compromisso de Sevilla, and its urgent call with respect to domestic resource mobilization. Paragraph 28G of the Compromisso commits to enhance beneficial ownership transparency and cooperation on exchange of beneficial ownership information and to explore the feasibility and utility of a global beneficial ownership registry. to strengthen international tax cooperation. The tax convention is a natural home for this policy solution. Evidence suggests that tax evasion has been displaced from financial assets to other assets, such as property and real estates. In the spirit of the compromesso, we call for leveraging the progress made with beneficial ownership transparency reforms and for the convention to include a commitment towards the interconnection of national beneficial ownership and asset registers into a global register. This would allow for up-to-date and real-time access to crucial information, which the current mechanism for the exchange of information do not. Domestic registers are the building blocks for this solution, as well as for other forms of tax cooperation. We therefore propose the convention to require the implementation of effective and comprehensive national beneficial ownership registries for companies and other legal vehicles adhering to commonly agreed standards. Public access to relevant information would allow civil society to play its part in realizing the objectives of the convention. Where certain asset registers do not exist, we second the previous statements by African member states that the commitment should include the creation of these registers. These solutions are cross-cutting and would help address a broad range of the convention's commitments, notably the taxation of high net worth individuals and the addressing tax related illicit financial flows, tax avoidance, tax evasion and harmful tax practices. These issues do not recognize borders and they require ambitious transnational solutions. Thank you.

Thank you. We have now have.

Madam President, esteemed delegates, I speak on behalf of the Tax Justice Network and the Civil Society Group. There has been a historic failure to develop transparency as a fundamental principle of tax policy. For too long, existing frameworks have fallen short of guaranteeing access to administrative assistance and exchange of information for countries that need it most. Principle 9i of the TOR demands high standards of transparency as a global norm. However, where public access is limited, frameworks must align to principle 9a, guaranteeing they are clearly embedded in a principle of differentiation. The process in the negotiations is approaching a critical juncture. The design choices made about transparency will determine whether the convention can deliver, and be seen to deliver, on the primary commitment to deliver a fair allocation of taxing rights. The unequal access to data is both a symptom and a driver of global inequalities in taxing rights and of national tax systems that do not deliver on public preferences for more equal societies. Our detailed analysis on misaligned profits demonstrates three key points. First, the continued absence of public country by country reporting represents a structural subsidy to tax abuse. Second, even limited empirical evidence confirms that public country by country reporting would act as a significant deterrent to profit shifting, with benefits for almost every country. And third, the unequal distribution of losses highlights the injustice of the current system, in which states least responsible for setting international tax rules bear the heaviest proportional costs. the compromis de sevilla adopted by states in two thousand and twenty five includes an explicit pledge to evaluate the creation of a central global public database for country by country reports. We call on all countries to take an ambitious stance on mutual administrative assistance, including through the ABC of tax transparency, which provides a cross cutting package for implementing several commitments outlined in the terms of reference of the UN automatic information exchange of information on financial accounts with non reciprocal access for developing countries during a transition period, beneficial ownership transparency echoed in a global beneficial ownership register and public by country reporting. The convention should also address transparency around incentives and the role of enablers in facilitating tax abuse. Concluding, Trillions of dollars have been lost, undermining the capacity of countries, especially in the Global South, to finance essential global goods. Negotiators here can move from piecemeal reforms to a coherent transparency framework and reduce the scope for corporate abuse. Esteemed delegates, Cooperation is not a luxury, it is the only realistic strategy to protect the tax sovereignty of states and the rights of their citizens. The domestic policy space should not be seen as preceding and constraining the ambition of cooperation, but rather as something that depends closely on what this framework manages to deliver. Thank you.

Thank you. Can we have South Centre please?

Thank you. So South Centre welcomes the article on mutual administrative assistance, and we support the proposal by the African group, particularly on the call for public country-by-country reporting. Developing countries often face challenges to access country-by-country reports. And we know that since the OECD inclusive framework began implementing action 13 on CBCR, only that in 2016, only that developing countries have fully implemented it. So implementation of public CBCR and other transparency measures can be a powerful tool that can increase access to information and discourage tax avoidance and profit shifting. We also wish to note that the complementarity principle should not be applied in a way that limits the convention's effectiveness or subordinates it to the existing instruments that have been developed in settings that were not truly inclusive. The framework convention should instead build on inclusive, transparent, and equitable system for international tax cooperation, taking into consideration existing frameworks, but not bound by them, uh, in a way that is inclus- inclusive process and it recognizes and accommodates the different capacities and needs of all countries. Thank you very much.

Thank you. Now, BCAS.

Thank you, Chair. Uh, I have a very minor comment on, uh, the second sentence in, in para one of, uh, Article six. This sentence gives a list of items for which exchange of information could be done. I mean, there are suggestions to remove this sentence altogether. Assuming that this sentence has to be retained, then I would suggest inclusion of ownership and location of the assets of the person who is avoiding taxes and the presence of the individual in the country of the person who is avoiding taxes to be included in this sentence. Thank you.

Thank you, CYI.

Thank you, Chair, for the floor. I am John Pokofko from Youth for Tax Justice Network, speaking on behalf of the FFD Children and Youth Constituents of the major group of children and youth. Chair, we've had concerns raised regarding national sovereignty. However, true sovereignty in a globalized world means having the actual power to effectively tax. high net worth individuals. This power is currently undermined by cross-border tax abuse and the nefarious race to the bottom. Therefore, the convention is not an infringement on sovereignty, but a tool to restore and protect it. Our collective failure to tax wealth individuals drains hundreds of billions of dollars annually from public coffers globally. This directly undermines the ability of all states, particularly those in the global south, to finance essential public services and invest in sustainable development, which are core objectives of the convention. The cross-border nature of tax evasion by high net worth individuals makes it an international issue that no single country can solve alone. High net worth individuals use offshore accounts, shell companies, and trusts across multiple jurisdictions to hide wealth and evade taxes, creating a problem that transcends any single nation's border. Paragraph 9B of the TRs on the principle of respecting the sovereignty of member states means that states must avoid policies and practices that harm the basis of other countries. Paragraph 10B of the TR provides a solution to this problem by committing to address tax evasion and avoidance of high net worth individuals and ensure their effective taxation. Therefore, the UN tax convention is the appropriate forum for this necessary cooperation, and we wish to recall that this is a cooperation on international tax. Distinguished colleagues, by ensuring effective taxation of high net worth individuals everywhere, We ensure that global cooperation provides the framework for all countries to effectively apply their own tax policy and finally sustainably finance their development to which they have committed. Thank you very much, Chair.

Thank you. We now have DMUN Foundation.

Thank you, Chair, for the opportunity. I will give my comments in French. Je m'appelle Divine Ella. Je suis Congolaise de la RDC, et je représente la Fondation Dimun. Alors pour ce qui concerne l'assistance administrative mutuelle, voici nos points. Le premier point, c'est les formes d'assistance. L'assistance administrative mutuelle englobe un large éventail de coopération. It should exist in forms of key, including the exchange of information on demand, spontaneous and automatic, the assistance in the recovery of tax debts, inspections and the assistance in the notification of documents related to tax issues. The second point, the scope of the exchange of information, is without doubt the most crucial element. It allows tax authorities to share information that may be relevant for the assessment and collection of taxes. It facilitates the detection and prevention of fraud and tax evasion by allowing States to verify the income of assets held abroad. The third point is broader tax coverage, multilateral agreements, whereas a bilateral agreement, such as the United Nations agreement on double taxation, covers income and capital taxes. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which the United Nations approves as a useful tool, covers a much broader range of taxes, including but not limited to income tax, corporate tax, capital gains tax, and often consumption taxes such as value-added tax and excise duty. Then, the fourth point, guarantee for the taxpayers and confidentiality. The provisions of the mutual administrative assistance are accompanied by strict guarantees. The States are obliged to preserve the confidentiality of the information exchanged and to use it only for fiscal purposes. assistance can generally be refused if it leads to the disclosure of trade secrets or if it is contrary to public order. So to conclude, the last point is the fight against fraud and tax evasion. The primary objective of the mutual administrative assistance agreements, especially for developing countries, promoted by the United Nations model, is to strengthen the application of national tax legislation and to fight against fraud and tax evasion. Thank you.

Thank you, dear MUN. Okay.

So basically, we have come. to the end of this set of discussions on Article 6. We still recommend that members continue to think through. I think quite a number of things have cropped up in relation to the article, in relation to what we want to do, what we don't want to do. There's a question that came up as to whether we wanted to take over, replace, complement, or whatever. These are decisions we'll have to take as member states is not for the chair to take. So we'll still need to talk to each other and decide what we want to do with this. The comments that I've kind of been taking note of, we still have the opportunity to provide comments as was indicated after the 5th of December. We can have written comments. We encourage that where it is possible to provide text, drafting text, please do so, so that it will make it easier for us to put together what we are thinking. So with that, we, okay, it's too early to take a break. We'll move to Article 7 straight away and continue with Article 7. Now, with Article 7, it is on illicit financial flows, tax avoidance and tax evasion. What we actually did was that we sort of did a split with the harmful tax practices in doing this so that we'll have some flow. So what we have here, Again, is a marked change from what we had earlier, but this is what we gathered from the discussions and the intercessional sessions. So what we have is the state parties agree to cooperate in combating tax related illicit financial flows, including a, by developing effective tools for detection of tax related illicit financial flows, enforced through international cooperation and transparent reporting standards as necessary to ensure effective taxation of income and profits from tax-related illicit financial flows. And B, through sharing information regarding structures and techniques used by taxpayers to avoid and evade taxes on their income. So that's what we have for illicit financial flows. We welcome comments from members on this. And as I've always said, it is our job to tear apart, turn upside down, turn it inside out so that at the end of the day, after analysis, we have a good document that we can all agree on. So comments are welcome. Right, very distinguished delegate from Zambia.

Thank you, Jeff, and good afternoon, colleagues and member states. I speak on behalf of the African group. So, co-chair, from the African group perspective, illicit financial flows, tax evasion, and tax avoidance are key issues that we are dealing with and one of the topical issues remains on how we handle illicit financial flows. We are grateful for the text that has been provided. We are happy generally with the text that has been provided. We just have a minor addition in subparagraph A where we propose an inclusion Immediately after the words by developing, we include or implementing effective tools so that it reads, A, by developing or implementing effective tools for the detection of tax related illicit financial flows and the paragraph continues. Your Excellencies, member states, colleagues, from Africa group perspective, we believe that We should not only develop, but we should also try to implement the effective tools that might already be there in existence, such that as the framework convention and related protocols come into force, tools that are already there and are effective would already have a commitment to adopt them and implement the effective tools.

That's our submission, Chair. Thank you.

Thank you, Zambia. Okay. I don't seem to have any member states. Oops, I spoke too soon. India, please, followed by Guatemala.

Thank you, Chair. India strongly supports that addressing tax related illicit financial flows is a fundamental measure to uphold fiscal integrity and stability and ensure equitable mobilization of domestic public resources. Effective taxation of such financial flows strengthens transparency, reinforces trust in financial systems, deterring the wrongful exploitation. In this context, India welcomes Article 7 of the current draft. We have only two suggestions to the current version. One is that the heading of this article can probably be changed to tax related illicit financial flows, tax avoidance and tax evasion. We feel that this would adhere more to the mandate that we are currently handling and would probably be more appropriate to mention tax related illicit financial flows. The second suggestion is that in the subclause, In subclause of this article, there is a mention of and profits. We think that this can be removed. We feel that taxing the income related to illicit financial flows is an all-encompassing term, and therefore we need not necessarily limit ourselves to profits related to that as well. However, we would be If the Secretariat can give us a clarification as to the intent behind the inclusion of and profits, we would be willing to reconsider that. Thank you, Chair.

Right, and maybe for some clarification, basically the text we have is a result of the discussions we had during the intersessional sessions where member states Just as we are doing now, ask for inclusions and exclusions and additions and all the other things. So basically, the text comes from what we asked for, um, and that is basically why we have the kind of the text that we have. And so, sometimes I hear the Secretary explain what is the, it's basically what member states told us and how we heard it. So if there is the need for a change, then maybe just indicate that, okay, you think you should change this because maybe that's not what we meant in the first place. Thank you. Guatemala, please.

Okay, thank you. It's just a brief suggestion. Regarding paragraph two, we believe it is important to consider what previous colleagues have said about the term taxpayer. The phrase, quote, techniques used by taxpayers to avoid and evade taxes, end quote, could be seen as contradictory since the subject, individual or enterprise, is actually not paying them. On this matter, for example, in Guatemala we use the term contribuyente. which translates to taxpayer and refers to the person who is ultimately paying the tax. However, we also have the term sujeto pasivo, which could be translated as taxable subject or subject to the tax, as it expresses the idea that they may or may not end up paying the tax, but are initially obligated to do so. On this last point, it is important to note that the subject may either be an individual or an entity. Thank you.

Thank you, Guatemala. Belgium, please.

Thank you. Just a small editorial remark. I would like to see tax related illicit financial flows also in the title of the article to make it clear.

Thank you.

Thank you, Chair.

There seems to be a lot of overlap between Article 7 and also Article 6, because in essence we want to exchange information about the techniques that are potentially being used to not pay taxes or, you know, to have information to check whether the taxes are being paid. as provided in the domestic laws of the states parties. Also in sub-paragraph A, we are talking about enforcing what we are describing in the article through international cooperation. And I've been wondering whether it's something different than exchange of information and mutual administrative assistance combined. And if not, then perhaps we should stay with the terms that we are already using in the last article. sorry, previous article.

And then also regarding subparagraph B, we are pretty much saying the same thing as in the second sentence of paragraph one of Article 6.

So I understand that the title of Article 7 is rather different from the one in Article 6.

But we are, I think we are trying to achieve the same result in both articles. Thank you.

Thank you, Estonia. Jamaica, please.

Thank you, Chair. No, I was gonna make the same point.

That Estonia made about the overlapping, but I also wanted, I'm seeking clarification on whether or not.

There's a definition for tax related illicit financial flows.

I remember in developing the terms of reference and subsequent discussions, there were queries about what is a tax related illicit financial flow as opposed to an illicit financial flow.

So I just wondered whether or not that would be clarified in the definition section of the convention.

All right, thank you, Jamaica. And I think the question goes to all of us members, this really, not to the co-lead, as to what we mean by tax-related illicit financial flows and whether we would need to define it or not. It's food for thought as we go along. Austria, please.

Thank you, co lead. Um, yeah, following up on what was said earlier, I had similar problems in Estonia in kind of drilling down to what we are, uh, trying to say here. If I kind of absorb a little bit what is written down in, in subparagraph A, what we say, we agree to cooperate by develop tools. enforced by cooperation. So this is kind of a, we cooperate with tools to cooperate. So I think we have to be a little bit clearer here in the language. What exactly do we mean? And also transparent reporting standard, I think that is probably a tool, but not really an enforcement mechanism. So I'm seeking clarity on what we mean, and I think it goes a little bit beyond the exchange of information. and administrative assistance, but I'm not entirely sure if that is the case, so clarification would be helpful here. I echo that tax related should go into the heading of the article, and I kind of thank Jamaica for pointing to the elephant in the room that we all don't really agree on what a tax related illicit financial flow is. I think we should at least have to talk about it and then see if we can come to a definition or not. And then finally, subparagraph B, I was already commenting on it in the previous article that we think it's too specific in the sense of being a commitment here for the Framework Convention. We would rather propose to, to leave it out here in the same way as that we proposed it for the other article, thank you.

I think I would like to repeat it. I was going to put Austria on the spot, but I won't because, uh, but the issue is that since we are mentioning tax related illicit financial flows, it means that we are looking at it differently from illicit financial flows. So it will be good for us as we see to indicate what we think and why we are saying we should put tax related because then it means that there is some definition that we have in mind. There's something we have in our minds and it will be good to know that as we go on and it will help us all to fashion as we go on. Okay. So our next state is Peru.

Thank you, Chair.

Sorry, it was a.

A moment where I didn't hear it was us. Maybe a couple of comments and I'm going to echo some of the delegations who spoke before me. I think we align with the comment from Estonia and I think it was Jamaica that some of the elements in this article may be a bit repetitive from other articles. We also have this question on the differences between the tax related illicit financial flows and illicit financial flows per se, although we understand that we're heading towards a differentiation which will be relevant for this convention. Then this is more on Peru's internal legal framework, but there is in our case a difference of typification of tax offenses between tax avoidance and tax evasion, and so it will be a bit harder for us to work around the connection of the three terms put together between the illicit financial flows, the tax avoidance, and the tax evasion. And in that regard, and if we do follow a path that looks a bit like the one suggested either by Estonia or by Jamaica, whereby we move certain elements that may be similar or connected to other articles, for Peru it may be easier to live with illicit financial flows or tax-related illicit financial flows, but without making the link with the two other elements directly in the article. Thank you, Chair.

Thank you. Norway, please.

Thank you, co-lead, and let me say thank you for the draft and the efforts that has gone into this. It is an important issue that has been highlighted by many countries. As to what is meant by or the precise definition of tax related financial flows. We know that might not be entirely clear and we're not going to try to define this here on the spot. But we do want to say that we think it is important that we try to keep the commitment on a high level and we also have a note as similar as Estonia and Jamaica and others that There seems to be an overlap here with regards to Article 7 or potentially what could go into Article 7. And reading this, and we're going down to sub-paragraph A, it says by developing effective tools for detection of tax related illicit financial flows and is forced through international cooperation. then thought it might be good maybe to stop there. And I will try to at least elaborate a little bit on the thinking. But that goes to transparent reporting standards. And as we understand that is then information is going to be submitted between tax authorities. And well, we would think that is the intention. If not, we would. perhaps ask for clarification, then that perhaps is something that could go up into Article 6. That would perhaps similarly go for what is there in subparagraph B as far as we understand. But again, remember I'm open to further explanation, but do also note the potential overlap here, 6 and 7.

So we would do a little clarification on the reporting issue that has been, I think it's been raised several times. So we'll just give a little clarification on this.

Thank you. Thank you, Chair. I think the The use of the different term here was in response to discussions in the workstream that focused on the question of how do you -- that this article, or at least this paragraph, should be focused on detection of IFFs. If you think about detection of IFF, some of the tools that might be used are, and I think that some member states may already be using, is matching systems between the exporting country and the importing country to make sure that what is being reported in terms of volume and price to the exporting country matches what is being reported to the importing country in terms of volume and price. And so that is very different, potentially, to the type of information exchange, the annual information exchange that we're really talking about in Article 6. And there may be other techniques. We've, in response to the discussions and requests to look at detection, we're starting to talk to people about how to detect trade mispricing. And I think it's, we've heard the request for real-time data. I think what we're talking about here is more real-time than what is going to be described in Article 6. So that was the intention. It's a matter of exploration, doing research, talking to World Customs Organization and other organizations that are already dealing with this, the mutual customs administration agreements we've looked at talk about being used for not only customs enforcement, but trafficking and money laundering. But from what we've seen, it doesn't specifically refer yet, this is very preliminary, to the use for tax purposes. So it's something that we're looking, that we're trying to explore.

Thank you. We now move to Germany. The mic for Germany, please. Oh. Michael is sad because I've abandoned him. He's my next door neighbor.

I take it it is my turn. Sorry, I wasn't paying attention.

So I was, but -- Go ahead, go ahead.

Like for the -- not for the second, but that is a bit embarrassing, in particular because that is our first intervention. And given the fact that it is Germany's first intervention, we -- on behalf of Germany, I would first wish to take the opportunity to express our appreciation and also to commend all those who contributed to enabling this session being held here in Nairobi. On a general note, Germany really much appreciates the work that has been undertaken and the preparation of the current draft provisions in the work stream one. We believe that it is really helpful to have a draft in front of us. We apart from that, acknowledge the engagement of member states and the secretariat and we recognize the importance of establishing a coherent and effective framework convention. With view to Article 7, what I took note of first is that the provision speaks about combating So in the introduction to this article, it says committing illicit financial flows. In comparison to that, the terms of reference speak, if I'm not mistaken, about addressing, and I was wondering whether it would be conducive to that end to also mention prevention as is usually done, at least when it comes to tax avoidance and tax evasion, normally the language is on that prevention and I don't know, combating or the fight against. But my comment was actually on the elephant in the room that was mentioned by previous speakers and on the exploration or the common task to explore a definition for tax-related illicit financial flows. And in that regard, we took note that according to the heading of the article, it is supposed to address three elements, illicit financial flows, tax avoidance and tax evasion and based on the introductory, which refers to illicit tax, sorry, apologize, tax-related illicit financial flows, one might assume that what is then addressed under the letter A and B constitutes tax-related illicit financial flows. However, the text then makes a quite clear distinction between illicit financial flows in subparagraph A on the one hand and tax evasion and tax avoidance in subparagraph B on the other hand. So in this respect, at least the article seems to be inconsistent at the moment. And in front of this background, we too would like to support the calls for a clear definition of tax-related illicit financial flows. Without such a precise definition, there is substantial risk of inconsistent interpretation and potential overlap with lawful cross-border transactions. And a precise definition is essential for legal clarity and for ensuring that the enforcement measures are both appropriate and effective. I, I don't believe that we are in a position to come up with a definition on the spot, however, it is, uh, it has been in Germany's, or it has been Germany's view that at least tax avoidance, although being not desirable, is nevertheless, uh, regularly lawful and, uh, wouldn't constitute according to us illicit financial flows, thank you so much.

Okay, thank you Germany, China please.

Thank you, Chair. Two quick comments. The first one refers to the transparent reporting standards in subparagraph A. I am feeling uncertain about the transparent reporting standards. I don't know what they are. So my suggestion would be adding, for example, the internationally agreed transparent reporting standards. That's my first comment. The second one refers to sub-paragraph b, already mentioned in the previous interventions. It seems overlap with Article 6 and Article 5 and should be moved and consolidated into a general provision in Article 6 or maybe in a separate article. Thank you, Chair.

Thank you, China. Sweden, please.

Thank you, Chair. Yeah, also, I mean, risk repeating what has been said not only by me, but by others today. I mean, going back to, to make it raised it first, as long as we don't have the discussion on what we mean by illicit financial flows, I don't think that we will move so fast here. And I mean, this has been raised several times. I think that we -- so my question to you, Cher, is when are we going to discuss that? I know that you said that we need to do that, but my question is when? And second, I was trying to figure out -- I was -- thanks a lot also to the Secretariat for trying to explain why this doesn't -- what it brings. in addition to other articles. And then I was thinking if that was-- because for me, it's quite unclear not only what you mean by tax rate illicit financial flows, but also what you're trying to do with this article more sort of concretely speaking. So I was wondering whether the reference to this by the Secretary was that. Because, I mean, I think that B for us is very unclear, and I, I, when I read it, it reminded me of articles in some other areas that looks like that. So I was wondering whether the Secretariat was referring to that when, when, when you took the floor, or, and, and, and also I didn't hear very well whether you said, did you say, volume and price or value and price, I wasn't sure of that either. And, and, uh, it also makes me sort of think about transfer pricing when you talk about customs and because that's normally where you can use information from customs and you compare that to what's done in the, um, when it comes to, uh, the income taxation. Um, so I was just wondering because I think it's, It's indeed very helpful to understand why we are making changes or why we're making proposals, because otherwise I think it's really hard to sort of follow the amendments here. So, yeah, so it was a couple, two or three questions back to you, Chair, and the Secretariat. Thanks.

Okay, right, thank you. I think I would step in a bit here. Now, we, over here, we didn't mention exchange of information. We talked about reporting standards. So, for example, when it comes to, let me borrow from my friends, the accountants, when it comes to financial statements, there's a standard way of, either you're using a gap, you're using IFRS, some form of reporting, which if anybody picks it, the person sees exactly what, what is available for you to use. It's, when we come into moving, move a bit into customs, they have a nomenclature which is universal in that sense, or naming of items, classifications that are universal. Now, the idea here is if we are basically doing the same reporting, we have the same standard for reporting, it's more difficult for someone to play around with it because the same thing, means the same thing everywhere. So it doesn't leave an opportunity for somebody to either misdescribe something so that he uses it as a loophole to take something out or whatever. And that's where the issue of the trade invoicing an issue comes in. Because for a lot of places, what people do is that they misreport some of these things. And because I might have different standards, different way of reporting, some places might be reporting value, as you mentioned, some might just be reporting volume and no value. So if one is using volume and the other is using value, because it's not the same, it allows me room to play around with it. The other thing I was talking about, and this one is more for, the second one is food for thought as we think of the definition of illicit financial flows. Now, I don't know about, um, other countries, but then I do know that we tax gains or income that is generated from illegal activities when we find out, because we assume that it is income or it is revenue or it's a gain that has come to, to that person. And so the question is, if through corruption, let me use it that way, someone has gained some income and it's not being reported for tax purposes, is it tax related or is not tax related? If someone is smuggling and through that, He's avoided paying some tax and that's one basic, maybe even B2, there's some customs duty or something he has not paid that might not even declare the income for income tax purposes. So I'm just saying this as we think about the definition, we'll have a time to discuss it. I think we will have to discuss it, but let's just, the idea is for us to still think through as we go along and At a point, I think the very first time this came up, we said that as we go along and as we discuss it, we eventually come to a point where we'll all come to an understanding of what we mean or what we want to talk about over here. I don't think we finished our discussions. The text put up is supposed to help us as part of the discussion. And so I believe it's a conversation that we can continue. put our minds around it, and I believe at the end of the day, we'll all come to a meeting point as to what we really mean by tax-related. We've adopted it, we've been using it for a while, as we've mentioned, because the ideas are less used that, but let's also continue to think through it. Thank you. Bahamas, please.

Thank you very much. Three or four points I want to make on this. I'm glad that the Secretary and yourself have initiated the discussion about customs and customs fraud on really the misrepresentation of value on imports. The Bahamas not having an income tax and sourcing a significant amount of its revenue and taxes from import duties. This is a very significant issue for us. When the common reporting standard and FATCA came about on the automatic exchange of financial information, we also requested both of the OECD as well as the United States the ability to also receive information when it comes to -- about import duties and customs clearances and invoicing so we can have an ability to enforce our domestic tax rules when it comes to import duties. Well, both OECD and the United States said that was not in scope of what they were doing as part of their automatic exchange of information. And I don't want us to be as narrow as well when we speak about this. This provision here, I think, does narrow that when it speaks about effective taxation of income and profits. from tax related illicit financial flows. So, that should be broader if we are going to consider that language to be encompassing of import duty fraud, customs fraud, and its effect on tax revenue. But I'm pleased that that was brought up today. We also speak about here tax avoidance and the terminology, I think it was brought up earlier, where we're linking illicit financial flows and tax evasion. which are clearly illegal activities with tax avoidance, which can be characterized also as tax optimization, which depending on the country, but in most countries, tax optimization is not an illegal activity. And so I just think we need to be a little cautious with respect to that. The third point I want to raise has to do with Section B above. I still have a hard time rationalizing, sharing information regarding structures and techniques used by taxpayers to avoid and evade taxes. This terminology is used throughout this draft convention in a number of different sections, and it's still unclear what the intent of that is and practically how you are going to actually do that. Who are the bodies that are going to identify a particular structure that is intended for tax avoidance or evading taxes? What if it's not the primary purpose of the structure? For example, the structure could be for estate planning, which is completely unrelated to tax avoidance or tax evasion, but it may have a tax optimization strategy built in. So I'm really having a difficult time with that terminology with respect to structures and techniques. The last point I want to raise is really I don't understand colleagues in the room who are having a difficulty understanding what illicit financial flows are. Illicit financial flows are what they are. They're the illegal movements of money from one country to another. So if it is the movement of money due to an illegal action, that's an illicit financial flow. Uh, in its broadest sense, uh, and so when you speak about that, I think it's pretty clear, um, now when you say, uh, tax related illicit financial flows, um, I don't know if that overly complicates the issue because those who are involved in anti money laundering matters would know, that tax evasion can be a predicate offense to money laundering. However, the reverse isn't necessarily true where the illicit financial flows could be as a result of money laundering, they can be as a result of, for example, corruption or other criminal activities such as human trafficking. And so I think we have to be careful by inserting the word tax illicit financial flows if we actually mean something broader than that. Those are just my comments on this section. Thank you for the opportunity.

Right, thank you. And a little clarification again. If we look at the terms of reference, addressing illicit financial flows, tax evasion, tax avoidance, and harmful tax practices were put together in one sentence. These are not things we are bringing into the commitments that are outside what was in the terms of reference. So that is why these words are there. And okay, so I think I need to just clarify that part. Now, for us, our job isn't supposed to rewrite the terms of reference. but then to give some flesh to them as we go on in the commitments. So, um, the comments are welcome. I mean, there have been various things we need to look at and let's continue to provide our comments. Um, structures, so basically for tax avoidance, when we are talking about structures and techniques, yes, you want to, um, maximize whatever, or reduce your tax by going through some legal means or taking, um, loopholes, and this time I'm talking as, maybe as myself, not as co-lead, but in my country, we have the right to recharacterize that to give it the full effect it should have and tax it. So yes, um, I mean, these things do, do come up. And that's why we are discussing them. So at the end of the day, we come out with a commitment that we are all comfortable with, whichever way we turn it, all of us as states, member states will come up with. So thank you for the comments. I believe we can go on to Brazil.

Thank you, Chair. This issue has been raised several times since the door. And my perception is that we are stuck with this expression, illicit financial flows, because we inherited it from other documents from the UN, not necessarily legal binding documents, but documents. And it seems that we cannot avoid it. So we are trying to keep it. But the problem is words change their meaning and even the abiding force depending on the context or depending on the document or whether they are used in international setting or in one regime or in the domestic setting. And what countries are struggling with is that for many of them, the expression illicit conveys the message, the meaning that it represents something criminal under the criminal law. But here we are in a different setting and we are trying to use it in a broad sense. So one way I think that before the end of this session, we should at least have an attempt to say that we are using the expression in a broad sense. Where it's going to be placed, we can define, decide it later, whether in the definition or whether as a paragraph of that article. And we should try to say, convey the message that that word should be read in this context as encompassing tax avoidance, tax evasion, arguably even issues connected to customs or import duties, clearance, et cetera, as mentioned, because in that case it's actually more likely that there are other crimes involved, but not necessarily tax crimes are related to tax evasion. There might be exchange control rules violated, for instance. exchange of currency. So I think that we should keep, we should put in brackets a provisional attempt to define it in a broad sense, saying that we want it to be interpreted in a broad sense. Again, this is not to be the source of the obligations, it's just a topic that will be developed further. in an additional protocol and whatever documents will be devised or designed later in future protocols. So it's not to be a self-standing, self-applicable provision. It's just a commitment that we are trying to clarify what are the future projects that we are going to do. And as Michael from Germany pointed out, as it reads now, it seems that illicit financial flows is one word with a criminal content in the heading and in the following paragraphs. So there should be three different elements. Illicit financial flow should be one element, tax avoidance should be a different element, and tax evasion a different element in the heading, whereas in the paragraphs it might lead to a different conclusion. So that illicit financial flow would mean, it should be interpreted in a broad sense. So we need to find a consistency here, maybe just mentioning illicit financial flow in the, uh, uh, caput in the head, or say including tax avoidance and tax evasion. Thank you, Chair.

Um, Brazil, I can ask a question just for clarity. Um, are you saying that as the heading puts it, we have illicit financial flows, tax avoidance and tax evasion, that we should have different paragraphs relating to each of them? Is that what you're saying in the text? Back to Brazo, please.

Yeah. Well, I see that-- I'm not sure that I'll be able to reply exactly, but when we read the head, clearly it should mean-- at least it should be in the more conventional, established meaning, because we have three different elements. What I think that we should do, we should have a paragraph saying for the purpose of this convention, illicit financial flow should encompass tax avoidance, tax evasion, customs, irregularities, et cetera. What I had proposed before was to change the expression completely. My proposal in previous meetings was to change for irregular financial flow, but then we have a problem that expression has been used in different documents. in the UN and probably don't want to do that. So we are again stuck with the expression. In order to find a way to stabilize the expectations, we need an attempt, an initial attempt to define it and say that we intend to use it in a broad or broadest meaning, again, to be developed further in future protocols, not to have a self-enforcing force. just to be derived from the convention. Um, is it clearer now? All.

Right, thank you. Um, um, Singapore, please.

Thank you, Chair.

I would like to make two points.

First, Singapore fully agrees on the importance of taking all necessary measures to address tax-related illicit financial flows, or IFFs.

But a clear problem definition is critical. In this regard, we agree with Jamaica on the need for a clear definition of tax-related IFFs to clarify the scope of this commitment.

Similar to Germany, tax avoidance proceeds, not being unlawful in nature, would not be considered tax-related IFFs in our view. Second, we echo the views of other member states that the meaning of the term.

Transparent reporting standards in subpara A and what this means for state parties is unclear. We think that perhaps the explanation can be incorporated into the text or a commentary to provide more clarity. Thank you.

Thank you, Singapore. Kenya, please.

Thank you, Chair. I align with the comments that were made by Zambia on behalf of the Africa Group. The proposal to add implementation in paragraph A and not just talking about the developing of tools is in line with the purpose of this commitment, which is to address tax-related illicit financial flows, because developing the tools without actually implementing them will not go towards addressing the issues that we face. On definition, I agree with you, colleague, that it's a necessary discussion and that we will get to it, but in line with what Matthew said earlier, the terms of reference have already prescribed a commitment on tax related illicit financial flows, tax avoidance and tax evasion. Article three of the framework convention, which we are yet to discuss or negotiate, is going to contain the definitions. So the drafting of this commitment can indeed continue alongside or prior to the discussions on possible definitions of illicit financial flows. We also believe that recognizing and supporting the taxing rate of the jurisdiction where the illicit financial flows are originating from is an important measure that will contribute towards the purpose of this commitment and requires international tax cooperation. Thank you, Chair.

Thank you, Kenya. We now have Bangladesh, please.

Thank you. Article seven, that is illicit financial flows, I think this is common phenomenon in every, not only every, most of the countries there is financial illicit flows. In our country, Bangladesh, we are trying to stop this type of crime. Many colleagues said that This is not only a financial crime, but also criminal offense. And in our country, to stop financial illicit flows, illicit financial flows, there is money laundering, strongly imposed central bank taking action, and NBIAR, That is National Board of Revenue imposes huge penalty regarding illicit financial flows and that's why tax evidence and tax evasion reduce rapidly. So we strongly believe that developing countries require technical, analytical and IT support to effectively sharing information. and stop illicit financial flows.

Thank you.

Thank you, Bangladesh. Saudi Arabia, please.

Thank you so much, Daniel.

I think we just wanted to share the same thought that we agree with defining what constitutes a tax illicit financial flow before we commit to detecting the such IFFs. And second, we wanted to seek clarification on whether this article, Article 7 and Article 8, harmful tax practices, would be overlapping, because if I read the first paragraph, it seems that it solves half of the issue. So we just wanted to ask about this matter. Thank you.

Very quickly on the overlap between, yes, in the TR, they were all pushed, put together. But when we started the discussions in the work group, we sort of agreed that the first three sort of related to the same thing, while the harmful tax practice sort of stood on its own. So that's why we did, we broke it into two. Basically, that's about the only reason. If members want us to put them together, I mean, they can ask that we do so. Nigeria, please.

Thank you, Chair. A lot has been said. Nigeria just wants to express its strong support for the views already articulated by both Zambia and Kenya on this article. Um, in addition to that, we just also want to quickly say that we agree that definitions and clarification on the issue of illicit financial flows, uh, tax avoidance and tax evasion is necessary, uh, and will, will be useful. We don't think that will be a complication if the substance of the article is Uh, successfully navigated. We also want to agree with Kenya once again that it is important to recognize the rights of the jurisdictions where these illicit financial flows emanate. And I think my, my last point is just to say that under paragraph A, it is not just about the development tools. The development tools in and of themselves are not necessarily useful unless we implement. So implementation is also critical, um, as far as the provisions of paragraph A. Thank you very much.

Thank you, Nigeria. Republic of Korea, please.

Thank you, Chair. Korea would like to make two points quickly. First, since many delegates have already emphasized the need for a clear definition of the tax-related illicit financial flows, We will not, I will not repeat those points, but I'd like to make sure that assured understanding of key definitions is essential for ensuring clarity about the scope and the meaning of the provisions and for allowing future negotiations to move forward on a common basis. Secondly, given that the tax avoidance and tax evasion have different legal characteristic, Korea think it is necessary to clearly distinguish between the two so that the scope of application and the level of cooperation among states are not unnecessarily mixed.

Okay, so I will take a break for 10 minutes. Please get some fresh air and be back on time, please. If everybody could take their seats, please, we will continue the discussions. Daniel, over to you.

Okay, welcome back from the break. I'm sure we had some fruitful bipartisan discussions and bilateral discussions as we're doing a break. We will now call on the European Union to provide their comments.

Thank you, Mr. Chair, distinguished delegate excellencies. First time for me to intervene and I also wish to express my gratitude for hosting this first substantive session in Kenya. I believe a wonderful country and I'm experiencing very kind, caring people. I wish to contribute to this debate. It's on the recurring issue that emerged and it's on the need for definition on tax related illicit financial flows. Listening carefully to what delegates have noted so far, the first point I would like to make is that I think it's important to note that there is an ongoing negotiation on another resolution at the UN, and the title of this resolution is Promotion of international cooperation to combat illicit financial flows and strengthen good practices on assets return to foster sustainable development. Why this point and it's the second point from my side because I think there is a consistency issue to clarify here, and I wish to contribute to this debate by saying that there is an issue of consistency between the definition on illicit financial flows under the resolution that I mentioned and the intention here, I think, to introduce in this resolution, in this tax convention, a new definition of tax related illicit financial flows. Illicit financial flows do not include, in my view, to my knowledge, tax avoidance. There is a reason for that, and it's connected with what the representative from the Bahamas mentioned illicit financial flows concern illicit activities. Tax avoidance is not illicit. The distinction between tax evasion and tax avoidance, again, to my knowledge, is essentially that tax evasion is illicit because it's illegal, but tax avoidance is not illicit because it's not illegal. I mean, it's against the spirit of the law, but it's in compliance with the letter of the law. This is the important distinction to be made between tax avoidance and tax evasion. Again, tax evasion is illicit and is against the letter of the law, whilst tax avoidance is legal, but is illegal because it is against the spirit of the law. And the spirit of the law usually is the intention of the tax legislator to pursue a specific tax objective. So I see this negotiation of the intergovernmental body here, I see this as the opportunity for this intergovernmental negotiation committee to come up to a definition on tax related illicit financial flows that can include tax avoidance. But I would also recommend caution, and it's the same caution that the representative from the Bahamas mentioned, because we need to make a distinction also between tax avoidance and tax optimisation or tax planning strategies. Of course, I think all Member States here agree to the fact that what is to be a common purpose, a shared purpose, is to fight against tax avoidance, and that's what the EU is promoting with all the EU Member States. And some of you may know that we also have a directive on anti tax avoidance, which includes certain provisions and certain instruments to clamp down on tax avoidance. So just to conclude, there is a need, I think, for a precise definition. And it's a first step for legal clarity in order to agree to a commitment and if the case to a protocol, because this is also a possible conclusion to be drawn here, that is clear and when understood by all parties. This should be, in my view, in line with the language of the terms of reference. So Member States have already agreed to introduce a definition on tax related illicit financial flows that may include and should include, I believe, tax avoidance. I hope that this contribution from the European Union is well received and can help Member States to get to a common understanding and to a possible resolution, a way forward on the issue. Thank you.

Thank you, Eyu. And when you started, I seem to get where members have been coming from. But if we look at the terms of reference, tax avoidance and tax evasion are not subsets of illicit financial flows. So it reads addressing illicit financial flows, comma, tax avoidance, comma, tax evasion and harmful tax practices. Each of these items stand on their own. And so if maybe the impression has been given that they are all subsets of illicit financial flows, then I think maybe it's something that we all need to look at and clarify. So no one is saying that, at least from the terms of reference, is not saying that tax avoidance, Is, should I say criminal? Each of them have their definitions in our tax, uh, policies that we have. And so, um, as we are, we are going on, maybe we need to just take note of that also in our deliberations. So I hope that clarifies the issue because it seems the impression has been created that per the TOR, tax avoidance is a subset. And so it is a financial flow, they each stands on its own. They might have some relation, but then they still stand on their own. And that's why actually I asked Brazil the question, I asked whether he was saying we should have LSE fund and the rest as subsets of it or not. He reminded that question. So as we continue to think about definition, maybe we can know this also. We have member states. the flag up. Islamic Republic of Iran, please.

Thank you. On this article, we align with the views expressed by other delegations and equally believe that the scope and definition of tax-related illicit financial flows require further clarification to ensure legal precision and avoid inconsistent interpretation. We also note the overlap with Article 5 and 6 and suggest aligning the texts to maintain coherence while avoiding duplication. For developing countries, effective implementation depends on capacity building, technology transfer, and fair access to data and digital tools. Moreover, all cooperation under this article must fully respect confidentially data protection and national sovereignty.

Thank you. Um, back to the stakeholders, BCAS please.

Yeah, thank you, Chair. The, the issue is, uh, indeed bigger than the elephant. Uh, so, uh, you know, the term which is used here is tax related illicit financial flows. The term IFF has a clear meaning, which is linked to illegal activities. And the term essentially links the tax part to it, to such illegal activities. Now, if we are to do a literal reading of this term, we end up in difficult situations. And we can take a very simple example. Let's say a person gives a bribe of $20 to a tax officer, a government officer, to get a favorable tax ruling. This $20 is directly linked to tax, so one may want to say that this is tax-related IFF. And we can go on creating such examples, but probably that's not the intention behind this. Maybe somehow we are stuck with this word which is appearing in the TOR. Nonetheless, it may still be possible to define the term in a fashion that we achieve what we want to achieve. And assuming that we want to target the IFF the way they are normally understood, and there are several definitions available, we may want to define the term in this fashion. And I just read a simple definition could be, all financial flows related to illegal activities shall be treated as tax related IFF, unless such activities are appropriately disclosed and the taxes are paid on it. Now, obviously, the person who is engaging in such businesses will never going to disclose his activities and will never pay tax on it. So what we are doing is that we are essentially defining normal illegal activities, but we are also linking it to a tax aspect. So that's a backdoor entry for tax aspect, and yet we meet the definition. Now, this definition the committee may want to evaluate. There may be some, you know, some more issues related to it, especially the word flows. Now, assuming that some illegal activity is done and an amount of $100 is generated out of it, now a tax consultant may advise a client, keep this money in a locker. Unless you give it to someone, there is no flow and the provision doesn't apply. So the term flow, we have to understand how do we apply the term flow. Again, in the bank locker, there may be five, you know, five, five, five currency notes of $100. And obviously, the money is fungible. When $100 flows, how do we justify that the money which flew is from illegal activity or is from genuine business activities? Thank you.

Thank you. Latin dad.

Thank you very much, Mr. Chair. I will make my intervention in Spanish. Bueno, intervengo tambien en representacion de la red de justicia fiscal de America Latina y el Caribe en y como miembro de la Global Alliance for Tax Justice. As mentioned previously, the current fiscal system on which the international tax architecture is based has become obsolete to address the challenges our countries face and will face in the coming decades. Conservative figures indicate that the world loses more than $490 billion annually due to Los flujos financieros ilícitos provenientes del abuso fiscal de grandes corporaciones multinacionales e individuos de altos patrimonios que transfieren y ocultan sus ganancias en guaridas fiscales donde los facilitadores de esos flujos juegan también un rol crucial para mantener vivo este esquema de opacidad que se convierte en una nueva forma de esclavitud moderna, sobre todo para los países del sur global. en ese marco y a la luz del borrador presentado, teníamos 2 sugerencias específicas a desarrollar respecto al párrafo 7 a no el párrafo menciona el desarrollo de herramientas aplicadas a través de la cooperación internacional para abordar los flujos financieros ilícitos, incluidas las normas de reportes transparentes. But it does not provide sufficient information for its operability, nor does it offer real multilateral solutions for the real purpose of this work. In this sense, we consider that these key multilateral solutions must be based on, on the one hand, a transition towards the development of a unitary taxation with a distribution or a proportional distribution model, the formula approachment in English. Mr. President, I would like to thank the rapporteur for her report on the European Union's strategy for the development of the European Union's relations with the United States. More than replicating two paragraphs that could be seen as almost duplicative, we suggest integrating the exchange of information related to structures and techniques developed and used by taxpayers, advisors and intermediaries in separate articles on a global asset register and an automatic exchange of information, and ensuring that this exchange includes both individuals and multinational corporations. Recordar que la vida es efímera, pero deja una huella que puede perdurar a través de su historia. En sus manos, el mundo les está encomendando una tarea que puede ser histórica para la humanidad y su subsistencia. Ahora dependerá de ustedes mantener el status quo o reescribir sus líneas para sentar las bases de un sistema tributario internacional que aporte verdaderamente a un mundo justo, equitativo y sostenible. Gracias.

Right, thank you. TIZ please.

Thank you, Chair. My name is Gift Nyambe. I speak on behalf of Transparency International Zambia, Zambian Civil Society Organizations, and the African CSO Working Group on the UN tax conversion. We commend the inclusion of Article 7 on illicit financial flows. tax avoidance and tax evasion in the draft UN tax convention. However, we note that the Article 7 lacks real operational solutions. The paragraph mentions tools and international cooperation to address illicit financial flows, including transparency reporting standards, but does not provide enough information to be operational and does not provide any real material solutions. Secondly, The preamble of the article uses victims such as agree to cooperate with Article 7 using as necessary, which dilutes accountability. True transparency and accountability must be mandatory and comprehensive. Not only that, the detection tools in Article 7 alone are inadequate without public registers of beneficial ownership. inset show for tracing illicit financial flows and shell companies. There is also no mention of automatic exchange of information. It is important to always remember that effective cooperation requires automatic, not discretionary, exchange of tax information under common reporting standards. In order to strengthen Article 7, we recommend replacing agree to cooperate with shall undertake binding measures to combat tax related illicit financial flows. Secondly, we recommend integrating exchange of information related to structures and techniques developed and used by taxpayers, advisors and intermediaries into separate articles on a global asset register. and automatic information exchange and further ensure that this exchange includes both individuals and multinational enterprises. There is also a need to introduce specific articles on key transparency mechanisms, including public country by country reporting, a global asset register, automatic information exchange and beneficial ownership transparency based on commonly agreed standards in multilateral solutions. For non-public information, information exchange should be based on a joint standard to be developed by the COP and take into account the need and realities of all countries. Finally, there is a need to create a whistleblower protection mechanism to encourage reporting of tax evasion without fear or retaliation. Member States must recognise that while tax evasion is a global problem, its consequences are felt mostly Its consequences are felt most acutely in the global south. We need to be reminded that suspected tax evasion contributes to billions in lost revenue, threatening the achievement of the sustainable development goals. I submit. Thank you.

Thank you, Tiz. OTE, please.

Thank you, Chair. I'll be speaking in Arabic. Thank you for the opportunity. I speak on behalf of the Tunisian Economic Observatory and the Working Group of African Civil Society Organizations. First of all, I would like to note that it is strange at this stage of the negotiations to raise again the issue of defining illegal financial flows and their sources. specialized in the definition provided by the United Nations agencies and organizations such as UNCTAD and UNICA, and their inclusion of illicit commercial activities and harmful tax practices under this definition, and their ongoing work for years to determine the size of these flows and their impact. Therefore, it is not practical and effective for the negotiation process to limit the discussion to the definition at the African level. led to a significant reduction in our fiscal space and a significant loss of public revenues. This loss has led governments to implement austerity measures by reducing funding for essential public services such as education, health care and social protection. and the services on which women and structurally marginalized groups depend, the absence of which increases the unpaid care burden borne by women. This shortfall in revenues has also contributed to the increase in the debt burden on African countries, where we have repeatedly relied on external borrowing, which has led to an increase in debt service and created continuous pressure on national budgets. Takhser al-qara al-afrika sana wa ya ma yaqarab tamniya wa tamaniya miliyar dollar bisabab al-tadfaqat al-maliya ghair al-mashro'a muqabil musa'adat kharigiya l-tanmiya tatlqaaha tablag hawli tamniya wa arba'in miliyar dollar. Ma yiqarib ayya ma yiqarib khamsa w sateen balmia minatadfaqat al-maliya ghair mashro'a mazzara anshata tajariya qanuniya wala kana ghair mashro'a bima fi dalak atla'ab fi fawatiir al-tijara w al-takhthiq al-dharibi al-'adwani w fi hada al-sayaq min al-mutanakid. that the global North provides technical and development assistance to Africa while at the same time defending the preservation of tax rules and financial systems that facilitate these illicit flows. We welcome the inclusion of Article 7 on illicit financial flows, tax avoidance and tax evasion, and we support its objectives. غير أننا نرى أن الفقرة الثانية من المادة حول الهياكل و التقنيات التي يستخدمها المكلفون بالضرائب للتهرب و التجنب الضريبي غير كافية، و من الضروري تعزيزها من خلال إدماجها ضمن مواد مخصصة تتناول سجلا عالميا للأصول و التبادل التلقائي للمعلومات. Without a systematic multi-party exchange of information on how tax evasion schemes work, countries, whether advanced or developing, will not be able to keep track of tax payers and advisors who design them. Current global frameworks for information exchange like the common reporting standard of the Organization for Economic Cooperation and Development, which is limited in scope and does not align with the specificities and interests of African countries. It focuses primarily on financial accounts, ignoring the structures and techniques of tax evasion. Also, within the same framework, data exchange is often asymmetrical. where advanced countries receive more than they give. Integrating this dimension into the work on a global registry of assets and automatic exchange mechanisms would expand the scope of information exchange to include both tax payers and intermediaries who design tax evasion schemes. من شأنه أن يسد هذه الفجوة الحرجة في الشفافية، ويجب أن يتم ذلك في إطار حوكمة عالمية حقيقية تابعة للأمم المتحدة تضمن الإنصاف والشفافية. باختصار، نحن ننادي بتعزيز فاعلية المادة سبعة، والانتقال من المبادئ إلى التنفيذ بخلق أدوات الشفافية والتعاون اللازمة لمكافحة التدفقات المالية غير المشروعة المرتبطة بالضرائب. وشكرا.

Thank you. South Centre, please.

Thank you. South Centre welcomes this article on illicit financial flows, tax avoidance and evasion, and thank you, Chair, for the clarification that tax avoidance is already included in the title of this article. And as the previous speaker has said, there's an already existing UN definition of illicit financial flow, and it includes both tax avoidance and diversion. So this article should include tax avoidance in the definition of IFFs. And aggressive tax avoidance remains one of the key drivers of revenue losses for developing countries. Further to that, it's important for countries to measure and have updated data on the amount of IFFs. This will help to monitor progress with the aim of eventually reducing the IFFs to zero. So the article can also include a commitment to cooperate on generating and sharing regular and comparable data on IFFs. And further details can be elaborated in a protocol. Thank you.

Thank you. ODI Global, please.

Thank you, Chair. And thank you for Kenya for hosting us. So just a few comments. Tax-related illicit financial flows should be reflected in the title, just not to keep it very broad, as illicit financial flows have many other components. And also, as has been said before, a definition should be provided for tax related illicit financial flows, for example trade misinvoicing, tax evasion through undeclared income or hidden accounts, just to have a consistent definition across the different countries. And finally, it should be decided how to keep the concept of tax avoidance here with the illicit financial flows and tax evasion. As the text here of Article 7 mentions in the first phrase that we should combat illicit financial flows, tax evasion and tax avoidance, but it's not very straightforward to combat something that is legal, such as tax avoidance. So maybe Article 7 could list or identify some specific cases of aggressive tax avoidance that could be defined and combated. Thank you.

Thank you. CYI, please.

Thank you, Chair. I am Lurie Chigwesuk from the Youth for Tax Justice Network, speaking on behalf of the FFD Children and Youth Constituency of the major group of children and youth. Now, globally, developing and transitional economies lose an estimated 500 to 800 billion every year to illicit US dollars every year to illicit financial flows. For Africa specifically, Losses are estimated at roughly 3.7% of the continent's GDP. These flows drain vital resources, undermine public services, deepen inequalities, and even erode prospects for future generations. The impact that we're talking about within this frame is particularly severe on children and youth who face the dilemmas of shrinking physical space, reduced access to education, health care, social protection, and decent employment, within this frame you can also add even sustainable livelihood, which in themselves are critical for realizing the full potential and by extension achieving the sustainable development goals. We therefore, as youth and children, welcome the inclusion of Article 7 in the draft framework convention. Why so? Because it reflects the terms of reference mandate to address tax-related illicit financial flows, tax avoidance, tax evasion, and harmful tax practices. However, we note some challenges within the article that do not necessarily align with the goal to track tax and stop illicit financial flows. The challenges include the following. One, the current draft identifies the problem but fails to actually provide a clear and elaborate plan for its solution. And second, the elements of vague language. We're looking at notable terms such as agree to cooperate and as necessary, which we feel actually dilutes accountability levels by critical stakeholders, including, but not limited to multinational corporations and high net worth individuals among others that we continue to reference as we discuss this particular article. Our recommendations therefore are as follows. One, What is really needed are specific binding and multilateral mechanisms to dismantle the architecture that enables illicit financial flows. The article should explicitly reference the key tools that make this possible. Some of these include operational tools, where we call for the establishment of a global asset register, and a strong system for automatic exchange of information as very indispensable for operationalizing transparency, tracing hidden wealth, and ensuring all countries can access financial information on what we are saying is equal footing. It is only by doing this that critical development priorities of constituents such as children and youth within the age bracket of 18 to 35 will be catered to. And when it comes to language, we reinforce the call to replace vague phrasing with binding commitments. And we say it's important to use clauses such as parties shall undertake measures to combat illicit financial flows in place of the ones that dilute accountability, such as agree to cooperate and as necessary. I thank you, Chair, and I submit back to you.

Thank you. Next we have DMUN Foundation Inc. Please note that we are running out of time, so please keep your submission succinct. Thank you.

Thank you, Chair. Our delegation agrees and aligns with the statement from FFD children and youth constituency of MGCYS, so we echo their voices. The DMUN Foundation highlighted the following points for the harmful Sorry. The DMUN Foundation highlighted the following points for the illicit financial flows, tax avoidance, and tax evasion. The UN International Cooperation in Tax Matters, primarily through the UN Committee of Experts and broader UN resolutions, views illicit financial flows, tax avoidance, and tax evasion as major obstacles to sustainable development. Um, in third, we submit the following matters, drain on development resources, IFFs, which include tax evasion and aggressive tax avoidance, are consistently highlighted as draining vast sums from developing countries, thereby undermining the capacity to finance the sustainable development goals. Number three, increased tax transparency and exchange of information, a core strategy promoted by the UN is the urgent need to increase tax transparency. This includes strengthening mechanisms for the automatic and on request exchange of information between tax authorities. such as the Global Forum on Transparency and Exchange of Information for Tax Purposes to explore undeclared assets and tackle tax-related IFFs. Number four, strengthening tax treaties against abuse. The UN Committee of Experts updates the UN Model Double Taxation Convention to incorporate specific anti-abuse provisions to prevent MNEs from engaging in treaty shopping and other aggressive tax avoidance schemes that result in double non-taxation. The last one, addressing commercial IFFs, that is transfer pricing. Most of the IFF challenge is driven by commercial activities, specifically abusive transfer pricing by large multinational enterprises. The UN provides a practical manual on transfer pricing. to help developing countries prevent profit shopping, no, profit shifting, ensuring MNEs pay tax where economic activities occur and value is created. We thank you, Chair.

Thank you. And, um, I think with this we can close. Um, in the meantime, discussions on this article, um, tomorrow morning we'll move to the next article, which is, um, harmful tax practices. Uh, I want to make a clarification also about the timing, um, for those of us who are not aware of the process, um, when our time is up, for example, the morning session is up to one. As soon as one o'clock, the translation goes off. So it means that we can't, we don't have translation after one PM. That is why we insist on stopping on the hard times. At six PM, translation goes off because it's the end. And so just, that's why if you realize, we try to keep to those times and make sure that, because otherwise, um, some people will not actually hear what is happening. So it's just to clarify why we keep to those hard times for those of us who are new to the process. So with that, thank you. Let me hand over to the chairperson for any remarks for your closing.

We have no announcements today. And by that, I think we can release the interpreters for today. And we look forward to see you all back here tomorrow at 10 o'clock. Have a nice evening, everyone.