Developing countries across Asia are caught in a brutal squeeze between compounding sovereign debt, devastating climate impacts, and chronically underfunded public infrastructure. Yet every day, vital national wealth steadily leaks out of the region through corporate profit shifting and private offshore tax avoidance.
Cross-border tax abuse strips more than US$480 billion from public accounts worldwide every year. This is a loss exceeding US$1 billion every single day. For Asian nations striving to finance green energy transitions, build climate-resilient facilities, and maintain basic healthcare, these figures represent tangible real-world losses: unbuilt medical centers in Pakistan, missed climate adaptation funding in the Philippines, under-resourced classrooms in Nepal, and strained treasuries across South and Southeast Asia.
For decades, international institutions have pushed Asian governments toward tax rules designed by the Organisation for Economic Co-operation and Development (OECD). Most recently, several nations in the region began adopting the OECD’s 15 percent Global Minimum Tax on large multinational enterprises under its “Inclusive Framework.”
Proponents frame this policy as a major step toward curbing profit shifting. However, regional civil society networks, including the Asian Peoples’ Movement on Debt and Development (APMDD), warn that depending on OECD formulas to stop systemic tax abuse is like applying a tiny bandage to a deep, gushing wound. For countries of the Global South, signing on to the OECD BEPS Framework is tantamount to signing away taxing rights.
The core issue with the OECD model is its origin. Engineered by and for wealthy Global North nations that host the world’s largest multinational headquarters, the OECD process keeps primary decision-making authority in the hands of economic heavyweights. Its proposed 15 percent floor sits well below typical corporate tax rates across Asia, where statutory rates routinely range from 20 to 30 percent. Setting such a low global standard risks inciting a fresh race to the bottom, further eroding local revenue bases.
Even worse, OECD priority mechanisms favour parent-company jurisdictions over host economies. If a developing nation does not capture the top-up tax, that revenue defaults to the multinational’s home country—yielding disproportionate benefits for G7 capitals while leaving international tax rules entirely disconnected from global environmental crises.
This arrangement perpetuates an unjust paradigm for Asian economies. So-called “source countries”, where real production happens, natural resources are plundered, labor is exploited and vast consumer markets exist, are left fighting over leftovers while corporate profits flow overseas.
If Asian finance ministers intend to safeguard their domestic revenues, the decisive arena is not in Paris or Washington. It is at the United Nations Headquarters in New York, where states are gathering next week to negotiate a comprehensive UN Framework Convention on International Tax Cooperation under a democratic “one country, one vote” governance system that defends sovereign taxing authority and embeds ecological accountability.
The current global tax framework deepens fiscal vulnerabilities in specific ways across different Asian subregions. In Southeast Asia, economies such as Indonesia, Vietnam, and the Philippines lose substantial potential revenue from rapid-growth digital platform providers and foreign-operated mining enterprises, because current OECD standards prevent host nations from fully taxing earnings generated within their borders. While they are not members of the OECD, they have signed on to its Inclusive Framework on Base Erosion and Profit Shifting.
In South Asia, countries like Pakistan, Sri Lanka, Nepal, and Bangladesh remain trapped between severe debt servicing obligations and strict fiscal austerity programs. Unable to adequately capture corporate profits, governments frequently fall back on regressive indirect consumption taxes, such as value-added tax (VAT) on essential food and fuel, which place the heaviest burden on low-income families and women.
Compounding these struggles is aggressive regional tax competition. Asian nations are continually pitted against one another in a harmful race to offer foreign investors decades-long tax holidays and financial concessions, ultimately eroding tax bases across the board and resulting in staggering amounts of foregone revenues that could and should have been used for public financing of essential services and climate action.
The UN Framework Convention provides a historic opening to replace an outdated global tax system. Unlike OECD-led forums, where setting policy has long been dominated by wealthy economies, the UN platform operates on a simple, equal principle: one country, one vote.
To secure a fair international framework, Asian negotiators should align around three core priorities. First, the convention must institute unitary corporate taxation and strengthen source-based tax rights. Multinational enterprises should be evaluated as single global entities rather than loose collections of separate subsidiaries operating on a transfer pricing system that enables their profits to escape the tax net. Asian nations must push for formulary apportionment. That is, taxing enterprise profits where economic activities take place and based on actual sales volumes, payroll, and significant economic presence within each country. This reform would immediately seal major profit-shifting channels in the digital economy, manufacturing, and natural resource extraction.
Second, negotiations must tackle severe wealth disparities through progressive taxation and universal financial transparency. The convention should fulfill the mandate of its Terms of Reference (ToR) to ensure fair allocation of taxing rights, the equitable taxation of multinational enterprises, effective taxation of high net worth individuals and set the international legal standard for progressive tax reforms. This will require strong transparency and accountability mechanisms, including public country-by-country corporate reporting, automatic cross-border exchanges, publicly accessible beneficial ownership and asset information. These mechanisms will give Asian revenue agencies the necessary tools to trace hidden offshore assets and enforce progressive tax policies domestically.
Third, global tax rules must reflect environmental realities and contribute to addressing the climate emergency. Sitting on the frontlines of global climate disruption, Asian nations endure hundreds of billions in loss and damage from extreme weather events. Embedding the Polluter Pays principle into international tax policy would enable host governments to collect revenues directly from fossil fuel conglomerates and major corporate polluters, generating vital funding for energy transitions and climate resilience without piling on more public debt.
While national legislative updates can offer temporary relief, long-term fiscal stability requires restructuring global rules at their foundation. Moving away from destructive tax competition toward genuine regional solidarity means setting aside partial OECD fixes and false solutions, and demanding a democratic global tax system that prioritizes public well-being over corporate profits. The opportunity to reform these international rules is finally on the table. Asia must step up, stand with the Global South, and help lead the push for global tax justice.
Lidy Nacpil is the coordinator of Asian Peoples’ Movement on Debt and Development (APMDD).
