The pursuit of financial integrity

Joseph Stiglitz underlines the imperative of strengthening financial integrity – and how the negotiations on the UN tax accord can further this aim.

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AS negotiations for a Framework Convention on International Tax Cooperation continue at the United Nations, we stand at a critical juncture in the global fight for financial integrity. The choices we make here – about transparency, accountability and fair global taxation – will shape not only the future of international cooperation, but the very capacity of governments to serve their people. This is a moment that demands both clarity about the failures that brought us here and courage to pursue the systemic reforms our world so urgently needs.

Global finance is currently skewed, as gaps, loopholes and shortcomings in rules and their implementation allow tax abuses, corruption and money laundering to flourish, and financial integrity has become one of the defining issues of our time – not because it is new, but because the costs of its absence have become impossible to ignore. When vast amounts of wealth can be hidden, shifted or stolen with impunity, we should not be surprised that trust in institutions erodes, inequality widens and democracy itself comes under strain. We are living through a moment when, once again, we are reminded of an old truth: ‘Power tends to corrupt, and absolute power corrupts absolutely.’ In the Trump era, we saw how disdain for transparency, the normalisation of conflicts of interest, and the open encouragement for tax evasion and corruption at the top corrode governance from within. The recent OECD/G20 agreement exempting US multinationals from the 15% minimum tax is a blunt example of this kind of coercive power in action.

But this problem is far bigger than any one country or any one leader.

The diagnosis is by now clear and well documented. Illicit financial flows, aggressive tax avoidance, money laundering, corruption and secrecy are not accidents or marginal abuses. They are the predictable systemic outcomes of a global financial system designed with loopholes, opacity and asymmetries of power at its core.

Weak financial integrity fuels extreme inequality by allowing those at the top to escape taxation, steal public resources, hide assets and launder money while ordinary citizens pay the price. It undermines climate action by depriving governments of the fiscal space needed for the green transition. It weakens sovereignty, as states lose control over their natural resources, their own tax bases and policy choices. And it corrodes democracy, as economic power is translated into political power, often behind closed doors and beyond public scrutiny.

That is why the question before us is not whether we should act, but whether we can afford not to act now. The scale of today’s crises – economic, environmental, social and geopolitical – leaves no room for complacency. Financial integrity is not a technical issue to be postponed for better times. It is a precondition for addressing the defining challenges of our age.

Financial integrity in a time when multilateralism is under menace

We are discussing financial integrity at a moment when multilateralism itself is under attack. Around the world, there are forces seeking to divide us, to weaken international cooperation and to replace collective problem-solving with narrow national or private interests. The Trump administration withdrew from the UN tax talks although the rest of the world continues negotiations. Yet, the irony is obvious: the problems we face today are irreducibly global. Climate change does not respect borders. Financial crises do not stop at customs checkpoints. Illicit financial flows move precisely because borders are porous to capital, even when they are closed to people.

This is why defending multilateralism is not an abstract exercise, but a practical necessity. Financial integrity and transparency cannot be achieved by any country acting alone, no matter how powerful. Unilateral action is important, but without cooperation and coordination, it will always be incomplete and vulnerable to circumvention. The race to the bottom in taxation, the competition to attract hidden wealth, and the tolerance of secrecy jurisdictions are collective action failures. They can only be resolved collectively.

Cooperation on financial integrity is also essential because it enables better policy choices domestically. When countries coordinate on tax rules, exchange information and agree on transparency standards, they expand – not restrict – their policy space. They make it possible to tax fairly, to regulate effectively, and to invest in public goods without fear of capital flight or retaliation. Financial integrity, in this sense, is not a constraint on sovereignty; it is a foundation for it.

And yet, there is now a growing recognition of the weaponisation of globalisation and international rules to cater to the whims of the powerful, where the strongest can exempt himself when inconvenient, and rules are enforced asymmetrically and with varying rigour depending on the identity of the accused or the victim.

Valid tools to enhance financial integrity get misused for nefarious purposes, as governments are able to impose financial sanctions, restrict access to banking institutions by International Criminal Court judges, use anti-money-laundering (AML) tools and laws to threaten and silence opposition, including statements that NGOs receiving foreign funding is a form of money laundering, and use asset forfeiture laws (especially those related to drug crime) to corruptly grab land and resources to benefit individuals or grab power for running drug enforcement agencies.

This calls for strengthening accountability – for the perpetrators, but also the victims and enforcers.

What needs to be done

We are not starting from scratch. Over the past years, there has been a remarkable convergence of analysis on what is driving illicit financial flows and what must be done to address them. The UN High-level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) made this unmistakably clear: tax abuse, corruption and financial secrecy are not isolated failures. They are systemic features of the global financial system. Likewise, the G20 Global Inequality Report, which I had the honour to chair, showed that weak financial transparency and fragmented tax cooperation are central mechanisms through which inequality is produced and sustained, between and within countries. The problem is not a lack of solutions. It is a lack of resolve to implement them.

First, transparency must become the rule rather than the exception. This means full and public disclosure of who owns what and where. Beneficial ownership registries – covering companies, trusts, foundations and similar vehicles – must be mandatory, verified and accessible. It means moving towards global asset registries that allow tax authorities to identify and track wealth across borders. It also means public country-by-country reporting by multinational corporations, so profits, taxes paid and real economic activity can no longer be hidden behind accounting fictions.

Progress has been made, particularly on automatic exchange of financial information, but asymmetries of access to the information still remain. Too much of the information is restricted and subject in the cases of much law enforcement request to goodwill to cooperate and share information, instead of compelled by rules and laws with accompanying accountability mechanisms.

Second, international tax cooperation must be fundamentally strengthened. The current system allows profits to be divorced from real economic activity, enabling large corporations and wealthy individuals to opt out of the social contract. Both the FACTI Panel and the G20 report underscore the need for coordinated approaches that ensure income is taxed where economic activities take place, and that minimum effective taxation standards apply in practice, not just on paper. Information exchange must be automatic, inclusive and useable by all countries, not restricted to a privileged few.

Third, illicit financial flows must not be treated as an unfortunate byproduct of globalisation. This requires common definitions, shared data, and coordinated enforcement against trade mispricing, tax evasion, money laundering, corruption and capital flight. It also requires holding accountable the professional enablers – banks, law firms, accounting firms – whose business models too often depend on facilitating opacity. Without addressing these enabling structures, enforcement will always lag behind abuse.

Taken together, these recommendations form a coherent agenda: one that restores fairness, strengthens sovereignty and rebuilds trust in public institutions. None of this is technically beyond our reach. What is missing is not knowledge, but political courage. If we are serious about reducing inequality, financing climate action and defending democracy, then implementing these reforms is not optional, it is indispensable.

A historic opportunity: the UN Framework Convention on International Tax Cooperation

The capitulation at the OECD Inclusive Framework to exempt US multinationals from the global minimum tax has cost member countries billions in forgone public revenues, and in doing so has removed any last doubt that the failures of multilateralism represent a grave threat to national tax sovereignty.

And yet it is still possible for all countries to benefit by standing together in a collective defence of national tax sovereignty. The Africa Group’s leadership at the UN has created the ongoing negotiations of the UN Framework Convention on International Tax Cooperation – and it is past time for the countries of the North to commit to an ambitious global deal to strengthen every country’s taxing rights.

This negotiation represents a historic opportunity to rebalance global economic governance and to place financial integrity and transparency at the centre of the international agenda. Many of the issues under discussion – beneficial ownership transparency, a global asset registry, country-by-country reporting, automatic exchange of information – go directly to the heart of illicit financial flows and tax abuse.

It is not surprising that leadership on this agenda has come primarily from developing countries. They are, quite simply, the main losers under the current system. Their leadership has created a historic win-win opportunity: by standing together in collective defence of tax sovereignty, both North and South can benefit from stronger taxing rights, greater fiscal capacity and a more equitable global system.

Much of the rules that decide who has the right to tax multinationals’ profits was designed by rich countries at a time when many developing countries were colonies. The double-tax agreements ensure that source taxation is limited, to the benefit of rich countries where multinationals’ headquarters are located.

For developing countries, illicit financial flows are not an abstract concern; they translate into underfunded schools, fragile health systems, unsustainable debt and delayed climate action. The fact that ambition is strongest where the costs are highest should tell us something fundamental about the inequities embedded in today’s global financial architecture.

But ambition alone will not be enough. What matters is the language and the legal force of what is ultimately agreed. We cannot afford conventions that merely ‘explore’, ‘encourage’ or ‘consider’ action. Financial integrity will not be achieved through voluntary guidelines or best-effort commitments. What is needed are binding obligations – commitments that require states to act, to implement and to be held accountable.

If the convention and its protocols rise to that challenge, they can lay the groundwork for a genuine reform agenda, one that restores fairness to the international tax system, closes the channels of illicit financial flows and rebuilds trust in global cooperation. If they fall short, we risk entrenching the very failures we claim to address. Compatibility with existing frameworks developed at the OECD cannot prevent meaningful reform from happening.

This process should deliver tangible win-win benefits to both developed and developing countries, and result in a fairer international tax system where the taxing rights are allocated between countries to reflect economic activities that take place there, from employment to sales to exploitation of natural resources.

The concept of value creation has been exploited by multinationals to cherry-pick where to host certain activities (from intellectual property management to global procurement), claiming that this is where value is created. The reality is that multinationals’ profits are global in nature, and it’s difficult if not impossible to attribute them to a specific country using the current transfer-pricing rules.

A fair allocation of taxing rights is one that recognises that the profits of multinationals are a result of supply and demand factors, from employment to sales, and hence the only fair solution is one that allocates the profits of multinationals between countries based on a formula that reflects these factors.

We must abandon the fiction that multinationals are collections of independent entities. We need to transition to unitary taxation with formulary apportionment, taxing corporations as single firms and allocating their profits based on a just formula.

This will require country-by-country information on the activities of multinationals to be available to all tax authorities, which could be achieved with the creation of a central public database for country-by-country reports, a commitment included in the Compromiso de Sevilla [the outcome document of the Fourth International Conference on Financing for Development held in 2025].

The framework convention can and should enable this paradigmatic shift.

Domestic responses: acting with ambition while building global solutions

At the same time, we must be clear: global cooperation does not absolve governments of responsibility at home. There is much that countries can – and must – do unilaterally, even as international reforms advance. Governments can strengthen beneficial ownership registries, enforce existing tax laws, strengthen the work of anti-corruption bodies and AML and financial intelligence units, regulate professional enablers of secrecy, and make country-by-country reporting for multinationals public.

History shows us that transformative change often begins with political courage at the national level. Many of the policies we now regard as indispensable – from progressive taxation to financial regulation – were once dismissed as unrealistic or radical. They became possible because leaders were forced to recognise the scale of the challenge and the political pressure made them act accordingly. Today is such a moment. The concentration of wealth and power we see today is not sustainable – economically, socially or politically.

This message of ambition must run through everything we do. Financial integrity is not a narrow compliance agenda; it is about reclaiming the capacity of democratic states to govern in the public interest to deliver public services. The taxation of capital and the super-rich must work as a unifying strategy for mobilising democratic forces. It is about ensuring that those who benefit most from globalisation contribute their fair share. And it is about creating the fiscal and institutional foundations for a more equal, sustainable and resilient world.

We know what needs to be done. We know that the costs of inaction are enormous. The question is whether we will rise to the occasion. The stakes could not be higher – and neither could the responsibility we bear at this moment in history.                        

The above is the text of a high-level keynote address presented at the United Nations Economic and Social Council (ECOSOC)

*Third World Resurgence No. 368, 2026/3, pp 28-31