UN proposes taxing fossil fuel companies for damage to the environment

Fossil fuel companies could be required to contribute towards repairing climate-related damage and the ultra-rich could be subject to a global wealth tax under new proposals being debated by the United Nations.

The measures are part of a new international tax framework at the UN, focused on the proposed Framework Convention on International Tax Cooperation, which is intended to establish international legislation to prevent tax avoidance, improve resource mobilisation for developing countries and explore possibilities in taxing polluting industries and rich individuals more effectively.

Dozens of countries have supported the idea of stronger international tax rules, however developing countries have expressed concerns that the current draft is too weak. Proposals to tax the profits of fossil fuel companies have been watered down in their language, and the idea of a global asset registry which would make taxing wealthy individuals easier has been removed from the text.

Marlene Nembhard Parker, Jamaica’s main delegate at the negotiations, said: “In the context of Hurricane Melissa, which wiped the equivalent of 40% off our GDP overnight, it is time that the draft template text on sustainable development gets fleshed out. A much clearer link now needs to be made to environmental taxation and climate change, with clearer agreements on the actions that must be taken, nationally and internationally, particularly for the countries and industries who are most responsible.”

The Tax Justice Network has suggested that countries lose an estimated $492 billion annually to tax avoidance

She linked this proposed framework to the urgency of supporting countries affected by climate-related disasters, stating: “This [tax] is critical for domestic resource mobilisation so that countries can sustainably rebuild and become resilient to increasingly devastating climate impacts, rather than become more dependent on borrowing and debt.”

Since the convention was proposed by African countries in 2022, progress has been slow. The US has withdrawn from the talks and other, richer countries have argued that tax matters should be discussed within the Organisation for Economic Co-operation and Development (OECD), excluding the many countries who are not members. However, if countries can establish the details, this convention could be adopted as soon as the end of next year.

Campaigners have highlighted the importance of an international process to address inequality and climate change. The Tax Justice Network has suggested that countries lose an estimated $492 billion annually to tax avoidance, while also pointing to the sharp rise in profits earned by oil and gas companies to suggest the necessity of such global changes.