A proposed UN tax convention could shift global rules from taxing profits where companies declare them to taxing profits where they are actually earned.

This week, delegates from around the world will gather in New York to negotiate the proposed United Nations Framework Convention on International Tax Cooperation, a landmark agreement aimed at making global tax cooperation more inclusive and effective. If adopted, the convention would represent the most consequential overhaul of the global tax system in nearly a century, fundamentally changing how countries tax multinational corporations and, potentially, the world’s wealthiest individuals.

New research by the global union federation Public Services International (PSI) and the Tax Justice Network underscores the urgent need to reform the international tax system. Drawing on publicly available country-by-country reporting data, it estimates that governments could collect an additional $500 billion in corporate tax each year by replacing today’s ‘pay-where-you-say’ system with a ‘pay-where-you-play’ approach.

The current system is the product of century-old rules that are no longer fit for purpose. By allowing governments to tax multinational corporations where they declare their profits rather than where they generate them, it rewards companies for shifting taxable income into tax havens before reporting it.

In 2012, the G20 tasked the OECD with aligning where profits are reported with where companies actually operate. That effort failed, and profit shifting has only intensified. According to the PSI/Tax Justice Network report, taxing profits where they are actually earned would increase multinational corporations’ tax payments by 24 per cent without requiring any country to raise its........

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