In the face of global outrage at the low or no taxes paid by some of the world’s largest multinationals, the Group of 20 appointed the Organisation for Economic Co-operation and Development (OECD) a few years ago to design alternatives to end these abuses. In response, last week, the OECD put forward proposals for a new international tax system that could be imposed on the world in the coming decades. We are talking about a serious issue. In the United States, for example, 60 of the 500 largest companies, including Amazon, Netflix and General Motors, paid no taxes whatsoever in 2018, despite a cumulative profit of 79 billion dollars, because the current system allows them to do so, and in a completely legal way. These misappropriations, often legal, are based on complex arrangements but on a very simple principle. The multinational only has to play with the allocation of declared profits between its various subsidiaries. This way, it shows deficits where taxes are relatively high – even if it is in those countries that the company generates the bulk of its activities – to report high profits in jurisdictions where taxes are very low, or even zero – even if in reality the company has no customers there. As a result, every year, developing countries lose at least $100 billion, hidden by companies in tax havens. Globally, this diverts 40% of foreign profits from multinationals, according to economist Gabriel Zucman. With the accelerated digitalization of the economy, the amounts diverted are constantly increasing, as highlighted by many institutions, such as the International Monetary Fund and the United Nations Conference on Trade and Development (UNCTAD). But the most important move came from the OECD that proposed, earlier this year, to challenge the very foundation of the international tax system, which is the ability of multinationals to report their profits in the subsidiary of their choice. After decades of inaction, the process could move forward very quickly. After the publication, a few days ago, of its first proposal in this field, the organization will make a final one in 2020, laying the base for the new international tax system. After that date, the die will be cast, and it will be practically impossible to influence the reform process. That is why we need to raise the alarm for developing countries. They can no longer say that they have no voice in the process. The OECD has offered them a place at the negotiating table by creating a group called the “Inclusive Framework”. With 134 members, this is the arena where tomorrow’s global tax system will be decided. It is time for developing countries to mobilize. Increasing their fiscal resources is the only way to improve access to health, education, or gender equality or aid the fight against climate change Unfortunately, despite its name, we do not play on an equal terms within this “Inclusive Framework”. Rich countries have more human, political and financial resources to make their views prevail. With the largest concentration of multinationals, they are also those most influenced by the pressure of the corporate world, at the expense of their own citizens and the rest of the world. But by refusing to realize what is at stake, developing countries are also failing in their responsibilities. The OECD reform proposal is based on two “pillars”. The first is to establish clearly where corporate profits are generated for tax purposes. The ideal, for which ICRICT, the tax reform commission I chair, has been fighting for years, would be to consider multinationals as single companies, whose total profit should be taxed where they operate according to objective factors, such as sales, employment, resources, and digital users. In this field, however, the OECD’s proposals are neither ambitious nor fair enough, as we explained in our latest report. The share of profits that would be redistributed internationally would be limited to the so-called” residual” share of the multinationals’ total profits. Worse still, this principle would only apply to very large multinationals and the allocation of these profits would depend solely on the volume of sales, excluding employment or other factors that would favour developing countries. The second pillar is the establishment of an effective minimum corporate tax at the global level. Some developing countries fear that by abandoning the weapon of tax incentives, they will no longer be able to attract companies. Yet, the evidence that these incentives attract investment is controversial, according to IMF research. Even more importantly, if the international community agrees on a sufficiently high rate (ICRICT pleads for at least 25%, the average rate in developed countries), this would put an end to the race to the bottom that we are witnessing, whose only winners are the multinationals. This measure would remove the raison d’être of tax havens, while ensuring that all States have access to those resources essential for development. In the absence of an international consensus, some countries have chosen to find compensation solutions. This is the case of France, which will tax 3% of the turnover of companies in the digital sector. Others, such as Mexico, are considering the possibility of forcing platforms such as Uber or Netflix to pay VAT on services provided in the country. While it is a good initiative to tax revenues that are now escaping, it is impossible to compartmentalize the digital economy and take it as the sole objective of the reform, as more and more companies are using digital technologies as part of their commercial activities. And it is not with these one-off measures that States will emerge from deficits and repeated austerity cures. It is time for developing countries to mobilize. Increasing their fiscal resources is the only way to improve access to health, education, or gender equality or aid the fight against climate change. If the Heads of State and finance ministers of these countries continue to underestimate the importance of these debates, they will soon find themselves forced to accept a new international tax system that will not suit them. The winners will always be the same, but it will then be too late to protest. The writer is a member of the Board of Directors of Banco de la República, the central bank of Colombia, a professor at Columbia University