The Trump administration has dramatically retreated from the international order that the United States was instrumental in bringing into being. It abandoned the Paris Climate Accord, the World Health Organization, and the United Nations Human Rights Council; it suspended funding for the World Trade Organization and the U.N. relief agency for Palestinian refugees; it rejected the Sustainable Development Goals and renounced its legal commitments under the 1951 Refugee Convention; and it is currently reviewing all multilateral organizations to which the United States is a member and all international treaties to which it is a party to determine whether support should be withdrawn.
It is often assumed, and understandably so, that “America First” will accelerate the fragmentation of an already tottering multilateral order, one in which the rule of law will be subsumed by the shadow of powerful countries pursuing their spheres of influence. But could this breakdown also open new possibilities for greater international cooperation? The absence of the United States might remove one of the main spoilers — even under previous administrations — of past attempts at international cooperation, and pave the way for more aspirational and effective global agreements. To be sure, other States that have been spoilers at multilateral negotiations will likely remain, but there are likely an array of issues on which real progress can be made without the United States at the table.
The international taxation agenda is a case in point.
An Emerging Global Taxation Framework
Multinationals currently avoid tax payments of at least $240 billion annually, if not more, and millionaires and billionaires the world over are often taxed proportionally less than the working class. These inequalities are compounded by the globalization of financial capital, which has facilitated the ability of corporations and the very wealthy to evade taxation by shifting their profits to tax havens, thus depriving States of the fiscal resources needed to invest in poverty eradication and public goods.
The Organization for Economic Cooperation and Development led efforts culminating in 2021 in an agreement for a global minimum corporate tax, an accord that President Donald Trump withdrew from only hours after returning to the White House. A significant step forward, the OECD’s success was nonetheless diluted from what African and other Global South governments had sought due to resistance from the OECD’s wealthy member States. While experts proposed a global minimum tax of 25 percent, the OECD only agreed to 15 percent, with very little of that revenue accruing to countries most in need of filling their public coffers, because the commitment to dividing taxing rights between countries was also eroded in favor of already affluent countries.
Last year at the United Nations, the majority of countries approved the parameters for a new global tax convention that aims to take a more ambitious approach (although the United States and other high-income countries voted against it). Negotiations are moving forward — although again without the participation of the United States — in the expectation of delivering the convention by the end of 2027. Parallel efforts are taking place at the national level — for example, in Brazil, where the government wants to remove the income tax burden from the lower middle class and transfer it to millionaires.
For the first time last year, discussions on the creation of a global minimum tax on billionaires took place under Brazil’s presidency of the G20. The final declaration also included the idea of taxing the super-rich. Their wealth — especially that linked to Big Tech — is generated globally but escapes taxes due to their ability to store wealth offshore under layers of secrecy. Further, the companies they own face minimal taxation owing to outdated international rules developed more than a century ago that restrict the ability of the Global South to effectively tax these companies and their billionaires. The proposed U.N. tax convention also provides a valuable avenue for taxing digital services, especially those provided by Big Tech. A more robust tax rate for the super-rich, as well as globally coordinated rules to tax transnational tech providers and ensure that wealth generated in a country pays taxes in that country, are fundamental not only to achieving global tax justice but also for defending democracy.
Why Progress on International Tax Reform Matters
Decades of neoliberalism have hollowed out States from within, dismantling the public sector and leaving governments without the fiscal space to invest in public infrastructure, healthcare, and education. If people do not believe that their democracies have the capacity to transform their lives for the better, then their support for democracy eventually collapses. Tax reform not only boosts the public coffers but also bolsters a State’s capacity to influence social transformation that is essential to sustaining democracy.
Progress on international tax reform may also herald a more democratic multilateral order, one led by the Global South that addresses the needs of the world’s majority.
Progress is Possible – With or Without the United States
This year, South Africa holds the presidency of the G20. There were whispers that the United States might withdraw from the grouping even before the Trump administration’s animosity with South Africa flared.
One could argue that, without the United States taking forward the progress on tax reform would be irrelevant — what worth is an international tax convention without the world’s largest economy? Would it not result in a race to the bottom? While this argument could be made of any multilateral agreement (be it on labor standards or environmental regulation), it should be noted that almost $500 billion in tax dollars are lost annually to tax havens — including $177 billion lost by the big spoilers themselves. The negotiations on an international tax convention aim to create a more inclusive and equitable framework for tax cooperation that stands to benefit all countries.
A multilateral approach to international tax reform is not intended to antagonize the United States, nor should it be detrimental to the U.S. economy, but negotiations must continue even if the United States is not at the table.
Today’s most challenging problems transcend international borders. Surging populist nationalism, deepening climate crises, destabilizing new technologies, and widening inequality between and within countries all demand multilateral approaches. The absence of the United States from international fora is no doubt an obstacle, but it is also an opportunity to move forward on multilateral solutions for people and the planet, especially those led by the Global South. These countries can lead the way with progress on the international tax reform agenda.
