UN Tax Convention: A Structural Transformation for Financing Health [Guest Essay]
UN Tax Convention: A Structural Transformation for Financing Health [Guest Essay]
Newsletter Edition #228 [The Curated Primer]
Hi,
The troubling question of financing for public goods cannot be wished away and glossed over. We cannot pretend that the very real pressures on raising resources for public investments in health, education and infrastructure is occurring elsewhere. This underpins the consequences of hollowed out public institutions we live with every day.
In today’s edition, experts from Partners in Health, discuss the recent breakthrough towards an international tax treaty at the UN, that could eventually plug the leaks in public finances, contributing to much needed resources for a range of needs, including health goals.
From Antimicrobial Resistance to Pandemic Prevention, Preparedness and Response, the negotiations on financing obligations is a heartache for developing countries, and a headache for developed ones. By addressing structural barriers in the way revenues are collected by governments (both rich and poor), vastly under-invested sectors might finally be able to tap into resources.
As a former financial journalist reporting on tax avoidance, it is exciting for me to see how interconnected and complex problems are being addressed across forums to improve development outcomes.
We are grateful for today’s contributors for enlightening our readers on the potential implications of this decision on global health financing.
Thank you for reading.
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Priti
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I. GUEST ESSAY
UN Tax Convention: A Structural Transformation for Financing Health
By Joel Curtain & Alicia Yamin
Joel Curtain, jcurtain@pih.org, Senior Director of Advocacy, Partners In Health.
Alicia Ely Yamin, ayamin@pih.org Senior Adviser on Human Rights and Health Policy, Partners In Health
A recent historic vote at the United Nations has set the terms for the first-ever global treaty on tax. The treaty, known as the UN Framework Convention on International Tax Cooperation (UNTC), represents a structural transformation that has the potential to deliver significant financing and increase health and social equity.
August 16th, marked a significant milestone in the struggle for financing the world’s health and social goals.
According to the 2024 Financing for Sustainable Development Report (FSDR 2024), between USD 2.5 trillion and USD 4 trillion annually will be needed to achieve the SDGs, while according to Development Initiatives, an additional US$307–416 billion per year by 2030 is necessary just to achieve SDG 3 on “Ensuring Healthy Lives and Well-being.”
The Pressures on Health Financing: The Structural Barriers
While rarely touched upon in the dominant discourse of global health, the struggle for resourcing health is deeply intertwined with battles for economic justice.
We should take the following as a starting point: the global South is a net creditor to the global North, to the tune of $2 trillion annually. A significant contributor to these enormous outflows is the siphoning of wealth by transnational corporations headquartered in the economic North in the form of illicit financial flows (IFFs), i.e., illegal cross-border movement of money or capital, which conservatively cost African nations alone $89 billion annually.
Other forms of corporate tax evasion, tax avoidance, and the practices of secrecy jurisdictions further facilitate enormous outflows. If we examine these unjust and neocolonial dynamics further, we see that the global North’s net appropriation of labor and resources from the global South outstrips official development assistance (ODA) by a factor of 30.
Given this analysis is usually given very short shrift in the discourse of health financing, it is often development assistance that is presented as the solution. This obscures the realities of these ongoing colonial economic arrangements whereby the South develops the North, not the other way around.
While “international assistance and cooperation” needs to be massively scaled up and democratized, focusing on development assistance without addressing the structural rules of the global political economy entrenches more than challenges the inequity imbricated in the status quo.
Debt Traps: Interest Payments Exceed Health Spending
Due to unequal power relations and the direction and scale of resource flows described above, countries across the global South are left with little option but to take on ever-increasing debts just to finance their very immediate health and other social needs. As these loans are overwhelmingly denominated in Northern currencies—most often U.S. dollars-- at high interest rates (e.g., on average Africa’s borrowing costs are 12 times higher than Germany’s), sovereigns lose control over basic social policies, including their health policies.
Crises such as the COVID-19 pandemic, volatility from climate-related events, and interest rate hikes in the U.S. all easily tip countries into debt distress and, in turn, subject them to even more aggressive forms of austerity imposed by international financial institutions.
This is what we are witnessing right now. To illustrate how unjust and unsustainable the current situation is, 3.3 billion people now live in countries that spend more on interest payments on their sovereign debt than on education or health (see image below).
There are 46 countries where interest payments on debt exceed health spending. Budgets for health, education, and other social services are cut because payments to creditors take precedence. When countries are being systematically shackled with debt, it makes the SDG mantra of “leave no one behind” seem like a cruel joke.
Indeed, debt-fueled austerity is especially bad for the health and rights of women and marginalized groups who are the first to lose formal sector jobs and benefits, find the health services and social protections they need eliminated, and have wage caps imposed on critical health sector jobs such as nursing.
The recent protests in Kenya, Nigeria, are the response to deepening austerity. Clearly there is a critical, immediate need for cancellation and restructuring of unsustainable and unjust sovereign debts to reduce this immediate human suffering, and essential work is being undertaken by civil society coalitions in these struggles. Nonetheless, as economist Ndongo Samba Sylla points out, even the cancellation of the Global South’s entire external debt stock does not get to the root of the problem, which is a global system of extraction and appropriation.
A Tax Treaty: Route to Structural Transformation?
The UNTC, however, offers a potential structural transformation unlike anything else in the sphere of financing for development. As noted by economist Dr Fadhel Kaboub, President of the Global Institute for Sustainable Prosperity, “the UN Tax Convention process is not just about collecting tax revenues but also about transforming the structures that we've been entrapped into.”
So we should not be so surprised then to learn that the world’s wealthiest countries have been attempting to disrupt the UNTC at every step, repeatedly rehashing bad-faith arguments as to why the world doesn’t need a UNTC.
Foremost among them is that a UNTC would duplicate the existing work of the OECD’s “Inclusive Framework”, which, despite what its name might suggest, is neither inclusive nor effective. The UNTC is so threatening to most wealthy countries precisely because it would democratize global tax cooperation for the first time, placing decision-making at the UN, where countries have an equal say.
This struggle for democratization is so critical because advancing health rights in our current context requires putting human rights in the service of building democratic political economies that strengthen transformative political possibilities. Doing so, in turn, requires holding transnational corporations, private financial institutions and other private actors accountable, and curbing their outsized power.
As underscored by the Center for Economic and Social Rights, a mutually beneficial relationship exists between human rights and taxation: “fair, progressive taxation is essential to the fulfillment of social, economic, and cultural rights […] in turn, human rights standards inform state action around taxation by dictating a duty to mobilize maximum available resources, to promote development through international cooperation, and to uphold principles of equality and non-discrimination.”
What Comes Next?
Last week’s vote sets in motion the process for negotiating the treaty, which will take place over the next three years. Ultimately, the strength and progressivity of the UNTC will determine the ability of countries to dramatically increase revenues in a fair, inclusive, and effective manner so that allocations for health and social spending can be greatly increased.
The Africa Group is championing the UNTC with the support of the G77, who are strongly backing it as a critical endeavor for financing the SDGs and other social and environmental objectives. A quick glance at the supporters of and opposition to the terms of reference for the UNTC, which were debated for three weeks preceding the vote on August 16th, shows a post-colonial divide (almost identical to the opposition to the TRIPS waiver during the COVID pandemic).
Voting positions of UN Member States on the draft terms of reference for the UNTC.
The Linkages Between Economic Justice and Health Financing
An illuminating 2022 report by the Geneva Global Health Hub highlights the interconnectedness of transformations for economic justice (in particular IFFs) and health financing, noting:
“These are the kind of unmentioned issues that need to be debated among WHO delegates when PPR financing makes its way on the agenda. In the emerging fragmented geopolitical landscape, WHO Member States – particularly from the global South – must find ways to converge on new essential instruments for financial justice. Such as stop paying for a debt, whose legitimacy must be questioned again, in view of global warming and climate change. Civil society organizations, too, need to fully understand dynamics at play, and avoid being captured by this systemic injustice, as if it were a condition that cannot be repaired. The world needs a healthy financial system now. We encourage all the constituencies involved in the pandemic accord at the WHO, and those involved in other fora, to join the financial justice call that comes from the very UN system that the WHO belongs to.”
This call to health activists and advocates to join the struggle is an essential one, and we now have that essential instrument to converge on: the UN Framework Convention on International Tax Cooperation. It’s imperative that the global health community comes to understand the interconnected struggles for health equity and economic justice and joins the movement for using the UNTC to drive fair financing of health and other social goods.
Our earlier stories:
II. WHAT WE ARE READING
Letter Urging Gavi, UNICEF to Negotiate Fair Price of Mpox Vaccines: Public Citizen
Digital rights advocacy: A new political determinant of health? Centre for Development and Environment, University of Oslo
Nature-rich nations push for biodata payout: Financial Times
Missed Warnings, $100 Vaccines and Red Tape — Why Mpox Was an Avoidable Emergency: Bloomberg
III. WHAT WE ARE TRACKING:
Informal meeting of the INB - Interactive dialogues and outreach: WHO [September 3,4]
INB11: [September 9-20]
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