NOVA Tax Lab Weekly Report on UN Framework Convention on International Tax Cooperation

The opening of the week was significant for the NOVA Tax Research Lab. On Monday, researcher Mariana Passos Beraldo delivered a statement on behalf of the Lab. The intervention, co-drafted with researcher Natalia Pushkareva and based on studies conducted by the Knowledge Centre, emphasised the need for legally binding commitments and clear, precise language in the Protocols to ensure credibility and effectiveness. It also highlighted the challenges arising from certain definitions, noting the necessity of establishing adequate criteria and qualification standards to ensure consistent application. Furthermore, the statement stressed the value of embedding #taxeducation and #taxcompliance cooperation as formal provisions of the Convention.

Negotiations throughout the week showed divergent positions among Member States. While countries such as EU members, UK, Norway, and Korea emphasised physical presence rules, net taxation, and mandatory arbitration, others including Brazil, Ghana, Nigeria, and Chile called for modern nexus criteria such as significant economic presence, gross-basis withholding taxes, and more inclusive and accessible dispute resolution mechanisms.

Several discussions pointed to the complexity of current transfer pricing rules, with many Global South delegations and civil society organisations arguing that they are outdated and inequitable. Calls were made for alternatives such as unitary taxation with formulary apportionment. The question of whether the new protocols should follow a self-executing design or require domestic implementation laws also drew debate, with a majority stressing the need to ensure coherence with the Framework Convention as a whole.

Information exchange emerged as another contested issue. While some delegations (including Senegal, Russia, and Côte d’Ivoire) pressed for special provisions to cover cross-border service payments, others (notably France, UAE, and Switzerland) considered existing mechanisms sufficient, warning against excessive complexity and data protection risks.

On dispute prevention and resolution, differences of view persisted. Some countries supported binding arbitration as a means to enhance certainty, whereas many others strongly opposed it, citing parallels with ISDS-type imbalances. Proposals from African and Latin American states stressed multilateral, fairer mechanisms and safeguards for developing countries with limited capacity. Preventive approaches such as joint audits, early risk assessments, and clearer taxpayer guidance received broad support across groups.

While positions remain diverse, the debates of Week 2 signalled incremental progress in clarifying the design choices that will shape both the Protocols and their connection to the Framework Convention. The balance between flexibility and effectiveness, inclusiveness and enforceability, remains at the heart of the negotiation process.

This project is funded by FCT, I.P. (Portugal), under project UID/00714/2023 (CEDIS/NOVA School of Law) and by MFA Legal.