The ongoing negotiations for a United Nations Framework Convention on International Tax Co-operation mark a historic shift in global tax governance. For decades, international tax rules have largely been shaped through forums such as the Organisation for Economic Co-operation and Development (OECD). The emergence of a UN-led process seeks to create a more inclusive and equitable framework for international tax co-operation, giving all countries an equal voice in shaping global tax norms.
India’s role in this process is significant due to the size of its economy and its longstanding advocacy for fair allocation of taxing rights. The country has been among the strongest supporters of moving international tax discussions to the UN. In 2023, India backed the UN General Assembly resolution that initiated the process toward a UN tax convention, joining a broad coalition of developing countries.
Indian policymakers and tax experts have consistently argued that existing international tax rules disproportionately reflect the interests of developed economies. Large market jurisdictions such as India often receive an inadequate share of taxing rights over multinational enterprises generating substantial revenues within their borders. India’s participation is essential as both a major developing economy and one of the world’s largest consumer markets.
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The digitalisation of the global economy has highlighted the shortcomings of traditional tax regulations, which rely heavily on physical presence. Through the UN convention process, India aims to advance principles that better recognize the rights of market jurisdictions to tax income generated from economic activities within their borders.
India’s role is vital in ensuring that the UN convention addresses the concerns of developing countries regarding resource mobilisation. Domestic revenue generation remains essential for securing the country’s infrastructure, healthcare, education, climate action and sustainable development goals in the future.
Challenges in Revenue Collection
Developing countries face challenges in profit shifting, tax avoidance, illicit financial flows, and limited administrative capacity. India’s experience in strengthening tax administration and combating tax evasion can provide valuable lessons.
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Another important dimension of India’s involvement is its capacity to act as a bridge between developed and developing countries. India has participated in OECD-led initiatives, including the Base Erosion and Profit Shifting project and the Two-Pillar Solution. While remaining constructively engaged in these processes, India has also emphasised the need for broader, more inclusive governance structures.
India has a unique position to contribute practical insights, ensuring that the UN convention complements rather than fragments the existing international tax architecture. The country is represented in the intergovernmental negotiating committee established by the UN General Assembly to draft the convention and its early protocols. This representation provides India with an opportunity to influence the substantive provisions of the convention.
