Nominations are now open [pdf] for the next UN tax committee, whose term will run from July 2013 to June 2017. Although the UN committee is not as influential as the OECD, I think that its composition will be one of the most significant determinants of what happens in international tax over the next four years, and a big factor in how the momentum behind the tax and development agenda plays out.
Because this is a committee of experts, who act in a personal capacity, the UN Secretary General will appoint its members from among the nominees, following guidance from the committee secretariat. Countries have just over a month to send nominations to the UN secretariat, but the first hurdle for developing countries at least is ensuring that the letter, which is sent to their permanent representations in New York, makes its way to the right person back home.
Although the case for the UN committee is usually made in terms of its ‘legitimacy’ relative to the OECD, I think that its ‘relevance’ to developing countries is going to be a more important determinant of its future status. The current committee did a number of things that may help with that, not least publishing a new draft of the UN model treaty and the new practical manual on transfer pricing for developing countries.
It might have been hard to see the added value of the latter, given that the OECD, World Bank and others have also been providing practical guidance on transfer pricing for developing countries. But chapter 10 of the manual, which emphasises the areas where China, India, Brazil and South Africa differ from the OECD, has broken new ground. It’s not at all clear what will happen with the Manual in the future – any kind of evolution into a developing country-friendly alternative to the OECD guidelines seems a long way off – but this will surely depend on the new committee’s agenda.
Similarly, the current Committee’s decision to introduce a new provision on technical service fees into the next model update would give the UN model a definite added value that responds to a demand from some of the smaller developing countries. But that decision is not binding on future committees, so whether it gets taken forward will depend very much on what the new committee decides to do.
There’s a tendency to think about whether the new UN committee will be good for developing countries in terms of the nationalities of its members. But if the emphasis is on the relevance of it outputs to developing countries, rather than on the representativeness of its membership, this isn’t necessarily the best yardstick. Although the current committee’s chair is from an OECD member, Mexico, he’s pushed through some decisions despite the opposition of other OECD members. The transfer pricing manual, produced by a subgroup chaired by a Norwegian, has already become the definitive description of the OECD guidelines’ inadequacies for developing countries.
Conversely, the vocal participation by some members from large developing countries has made the discussions more controversial, but it’s not always clear that these countries’ needs coincide with those of smaller developing countries.
Here are some other things to think about:
- How much capacity do members have to participate? The committee’s work has been hampered by members’ lack of time and inability to pay for travel to meetings, and this doesn’t look like it’s going to change. And unless smaller countries are willing to bear the opportunity cost of devoting significant senior staff time to the committee, having a lot of members from larger countries may mean a more engaged committee.
- How able are they to speak out? Committee members don’t have a formal mandate from their country, which might affect their confidence to speak up in contradiction of members from more powerful countries. Language is also an issue: like it or not, the committee works in English and can’t afford a lot of resources for translation, so it’s essential that experts nominated to the committee aren’t hampered by a less than fluent command of the language.
Where are members drawn from? Most commonly, they’re senior officials from international departments of tax authorities or finance ministries, although a few have been academics or even from the private sector. Seniority is good, because it helps deal with the previous point I made. But given the committee’s development mandate, it would be great (though unlikely) for developed countries to nominate members from development ministries.
We’ll find out who’s been appointed when the new committee is presented to the ECOSOC meeting in July. But one thing seems certain: the work done by the last committee, and the increase in interest in tax and development over the last few years, means this will be a higher profile transition than in the past.
Martin Hearson 