The recent Trade and Development Report 2019 by the United Nations Conference on Trade and Development (UNCTAD) has shed light on the need for significant changes in global taxation norms. One of the key recommendations is the adoption of a unitary taxation system for Multi-National Enterprises (MNEs). The recommendation emerged under the theme ‘Financing a Global Green New Deal.’
The Unitary Taxation System: A Simplified Approach
The UNCTAD report underscores the simplification of the global taxation system through the implementation of a unitary taxation approach for MNEs. This move is expected to increase tax revenues across countries. The rationale behind this proposal lies in understanding that the profits amassed by MNEs are a collective effort at the group level, which is why a unitary taxation combined with a global minimum effective corporate tax rate should be applied to all MNE profits.
Current International Taxation Woes
The current international corporate taxation principles treat affiliates of MNEs as independent entities. Moreover, taxable transactions between different organizations within MNEs are treated as unrelated. Such mechanisms facilitate tax-motivated illicit financial flows, creating a need for drastic reform.
Impact of Illicit Financial Flows
Tax-motivated illicit financial flows by MNEs constitute a significant drain on developing countries’ fiscal resources. According to the UNCTAD report, these economies lose an estimated 50 billion to200 billion annually.
Taxing Digital Economy Fairly
The rapid digitalization of economic activities has significantly altered the dynamics of value creation, measurement, and distribution, posing fresh challenges to the existing international taxation framework. The report brings to attention the potential enhancement in a country’s fiscal revenues through fair taxation of the digital economy.
| Fact | Description |
|---|---|
| UNCTAD Established in | 1964 |
| Headquarters | Geneva, Switzerland |
| Part of | UN Secretariat, United Nations Development Group |
| Reports published | Trade and Development Report, World Investment Report, Technology and Innovation Report, Digital Economy Report |
About United Nations Conference on Trade and Development (UNCTAD)
The UNCTAD is a permanent intergovernmental organization established by the United Nations General Assembly. It is headquartered in Geneva, Switzerland and operates as an integral part of the UN Secretariat. In addition to its unique membership, leadership, and budget, it is also a part of the United Nations Development Group.
UNCTAD’s role primarily involves assisting developing countries in leveraging the benefits of a globalized economy in a fair and effective manner. Along with other UN departments and agencies, it plays a crucial role in measuring progress against the Sustainable Development Goals, as outlined in Agenda 2030. Some of its significant publications include the Trade and Development Report, World Investment Report, Technology and Innovation Report, and the Digital Economy Report.
Last Modified: February 6, 2024