For decades, multinational companies have had the upper hand in deciding where profits are taxed, shifting them to low-tax jurisdictions regardless of where workers create value or where customers are located. Many countries in the Global South have had limited ability to tax those profits, even as they face growing pressure to finance development through domestic revenues. Workers worldwide have paid the price in underfunded public services and stagnant wages. Now, a narrow window for change has opened as the rules that govern corporate taxation are being renegotiated simultaneously at the OECD and the United Nations.

Corporate taxation directly affects wages, public services and economic security. Around $350 billion is lost globally, and more than 90 billion from Africa alone each year to corporate tax avoidance. The impact is not evenly shared. Lower-income countries lose the equivalent of around 36 per cent of their public health budgets, compared to around 7 per cent in higher-income countries. When MNCs shift profits away from where value is created, the result is fewer services, lower public investment and slower wage growth.

For trade unions, these issues are central to workers’ interests and to driving transformation. The Network of Unions for Tax Justice (NUTJ), alongside global and national unions, works to advance corporate tax systems that reflect where value is created and to strengthen public finances.

Existing international tax rules leave too much leeway to multinationals to book profits wherever rates are lowest, even when the actual business happens elsewhere. The OECD’s 2021 global minimum tax (GMT) seeks to reduce the incentive for this kind of profit shifting by ensuring that large multinationals pay at least a minimum level of tax wherever they operate. If profits are taxed below that level in one country, additional tax can be applied elsewhere to reach the minimum.

The OECD’s GMT creates a queue for who gets to collect any additional tax. Due to fundamental flaws in the design of the OECD reform, investment hubs and countries where multinational companies are headquartered are generally closer to the front, while countries which are not home to large multinationals but nonetheless record significant economic activity often find themselves further back. By the time the queue reaches them, much of the additional tax may already have been collected elsewhere. This helps explain why many countries in the Global South receive only a small share, if at all, of the additional revenues generated by the GMT.

While the principle of a global minimum marks an important attempt to curb aggressive tax competition, the OECD rules still allow taxing rights to follow where MNCs declare their profits. When profits are shifted to low-tax jurisdictions, countries where value is created have limited ability to tax them. The OECD rules do provide some scope for countries to strengthen their position through domestic measures, but the underlying problem remains.¹

A fairer and more effective design for a GMT would allocate the top-up tax everywhere value is created, in proportion to the multinational’s real economic activity. Instead, the OECD design reflects the political imbalance behind the agreement, with countries hosting multinational headquarters better positioned to collect additional revenues. While the GMT is expected to raise over EUR 150 billion in the long term, most gains accrue to higher-income countries. Even in more favorable scenarios, developing countries gain at most around half as much as richer economies, with more realistic estimates placing their share at negligible levels.

Recent developments have further weakened this limited progress. The OECD’s “side-by-side” agreement allows the United States, home to many of the largest and most profitable companies, to apply a different system from the one agreed under the GMT. This system permits blending across jurisdictions, meaning low-tax profits in one country can be offset by higher taxes elsewhere. The result is a special treatment for US multinationals that undermines the OECD GMT’s aim of establishing a firm country-by-country minimum and reopens space for the tax competition it was meant to curb.

1. One of the key features of the GMT is that it reduces the pressure on developing countries to offer overly generous tax incentives to retain foreign investment. Because multinational companies are now required to pay a minimum effective tax rate of 15 per cent regardless of where they operate, the GMT gives countries in the Global South greater leverage to resist corporate pressure for very low tax rates. However, as far as the GMT is concerned domestic provisions must comply with detailed OECD design requirements and they only apply to profits reported in the jurisdiction. 

    

The limitations of the OECD GMT point to the need for complementary national domestic reforms. The Corporate Alternative Minimum Tax (CAMT), developed by trade unions and tax experts, starts from a simple principle: multinational companies should be taxed where real economic activity takes place, not where profits are declared. It builds on the idea of a minimum tax while introducing a fairer way to determine where it is paid, allocating profits using observable factors such as sales and employment. These factors are harder to manipulate than internal pricing arrangements.

Evidence from firm-level data in Nigeria suggests that this approach could have a significant impact. The draft CAMT bill, developed using Nigeria as a model country, proposes a 25 per cent minimum effective tax rate for large multinationals. Based on the data, revenues from in-scope companies could double or even triple.

The CAMT model sets out how other countries with similar legal and economic contexts, could adapt the legislation to their own systems. In that sense, the CAMT provides governments with a tool that can be tailored and implemented without waiting for global consensus.

For African countries, the gap between where profits are generated and taxed has immediate consequences. The continent loses an estimated $80-$90 billion each year to profit shifting and illicit financial flows, more than total foreign aid inflows, while facing a financing gap of around $200 billion annually to meet the SDGs.

Raising domestic revenue is central to development strategies across Africa, yet tax-to-GDP ratios remain low at around 15-16 per cent over the last decade. With limited fiscal space, profit shifting directly reduces governments’ ability to invest in infrastructure, healthcare and education.

Nigeria illustrates these challenges clearly. Corporate income tax is a central pillar of public income, accounting for on average 44 per cent of total government revenue over almost a decade. This level of dependence makes under-taxation of multinational profits especially costly, as its impact on public finances is disproportionate. When such a large share of public revenue depends on corporate taxation, ensuring that MNCs are effectively taxed becomes essential. Strengthening corporate taxation is therefore central to closing fiscal gaps, with tax revenues at around 6.5 per cent of GDP on average, among the lowest globally and far from the 18-20 per cent President Tinubu considers necessary to support development goals.

Nigeria’s 2025 tax reforms allow authorities to tax MNCs based on their economic activity in the country, even without a physical presence, and introduce a more formula-based way to determine taxable profits. Together, these changes shift the focus from where profits are declared to where economic activity takes place, aligning with the approach behind the CAMT.

In Ghana, upcoming reforms create a similar opportunity. The government is expected to review the income tax legislation in 2026. This provides a clear entry point for adapting elements of the CAMT framework within an ongoing reform process.

International tax reform is moving, but it is not yet delivering the scale of change needed. The UN process offers a pathway toward a more inclusive system and deserves strong support, but governments cannot afford to wait while revenue losses continue.

This urgency was reflected at a roundtable in New York this past February, hosted by the Friedrich-Ebert-Stiftung, which brought together trade unions and government representatives from countries including Nigeria, Ghana and Kenya.

In Nigeria and Ghana, labor organizations are already advancing reforms such as the CAMT. If adopted, these measures could strengthen public revenues immediately while building momentum across the region. That snowball effect would not only help countries protect their tax bases, but also strengthen the case for more ambitious reforms in international negotiations. Governments do not need to wait for a global agreement to act. The tools already exist, and delaying reform is itself a choice with consequences.