What is the UN's "pay-where-you-play" tax plan? It is a proposed rewrite of the century-old rules that let multinational corporations book profits largely wherever they choose, replacing them with a system that taxes companies based on where they genuinely do business, where they employ people, make things, and sell to customers. For Nigeria, the Tax Justice Network estimates the shift could be worth $2.5 billion a year in additional corporate tax revenue, a 641% jump on what multinationals currently pay here.
Where did this proposal come from?
The plan surfaced at the fifth negotiating session of the UN Framework Convention on International Tax Cooperation, held in New York from 3 to 13 August 2026. It targets the "arm's length principle" that has governed how multinationals price transactions between their own subsidiaries since the 1920s, the same principle Nigerian tax authorities already lean on heavily in transfer pricing audits, as we saw in our case study on how one oil & gas firm avoided a ₦10 million transfer pricing penalty. Negotiators are pushing instead for "unitary taxation": treating a multinational group as one single entity, then dividing its global profit among countries using a formula built on real economic presence, payroll and sales, weighted equally in the current draft model.
How much could Nigeria gain?
Modelling published by the Tax Justice Network in early August puts the potential gains at $500 billion a year worldwide under a conservative formula, and as much as $1.1 trillion under a less conservative one. Nigeria's own projected gain, $2.5 billion annually, stands out even against its peer group:
- High-income countries: +21% additional corporate tax (at least $140 billion combined)
- Upper-middle-income countries: +31% additional corporate tax (at least $112 billion combined)
- Lower-middle-income countries (Nigeria's bracket): +200% additional corporate tax (at least $61 billion combined)
- Low-income countries: +400% additional corporate tax (at least $3.6 billion combined)
Nigeria's projected 641% increase is more than three times its own income bracket's average, largely because so much of the profit generated by multinationals operating here, in oil and gas, banking, telecoms, and consumer goods, is currently recognised in lower-tax jurisdictions rather than in Nigeria, where the employees, wells, branches, and customers actually are.
When could this take effect?
Not soon, and not automatically. The INC Tax negotiations are targeting a final agreement by late 2027, and any convention would still require signature and ratification by member states, including Nigeria, before it has force. That timeline runs alongside, not instead of, the OECD's separate Pillar Two global minimum tax push, which we covered when the US secured a carve-out for its own multinationals. Nigeria is watching both tracks, and its own Nigeria Tax Act 2025 has already tightened transfer pricing and profit-allocation scrutiny domestically, ahead of any global agreement.
What this means for your business
- If you are a Nigerian subsidiary of a multinational group, or you supply or contract with one, expect transfer pricing and profit-allocation scrutiny to intensify well before any UN convention is ratified. Nigerian revenue authorities are already testing the limits of the current arm's length rules.
- If you operate across borders yourself, even at a modest scale, start tracking where your people, sales, and physical operations genuinely sit, not just where your holding structures are registered. Unitary-style formulas reward documented substance over paper structuring.
- Boards and CFOs in oil & gas, banking, and shipping, the sectors with the deepest cross-border structures, should treat this as a multi-year signal rather than a filing deadline. The direction of travel, domestically and globally, is toward taxing profit where it is actually created.
FAQ
What is the difference between "pay-where-you-say" and "pay-where-you-play" taxation? "Pay-where-you-say" is the current system, built on the arm's length principle, which lets multinationals largely determine where profit is booked through internal pricing and legal structuring. "Pay-where-you-play" would instead allocate a company's global profit to each country based on real economic activity there, such as its workforce and sales, regardless of where its subsidiaries are legally domiciled.
Is Nigeria part of the UN tax convention negotiations? Yes. Nigeria has participated in the Intergovernmental Negotiating Committee sessions, including the fifth session held in New York from 3 to 13 August 2026, and stands to gain more, proportionally, than most of its income peer group if the convention is adopted in its current form.
Does this affect my business now, in 2026? Not directly. The convention is still under negotiation, with a target date of late 2027, and would require ratification afterward. But it reinforces a trend already visible in Nigeria's own transfer pricing enforcement under the Nigeria Tax Act 2025, so businesses with cross-border structures should begin documenting genuine economic substance now.
Cross-border structuring, transfer pricing, and multinational tax exposure are only getting more scrutiny, in Nigeria and globally. VOG Global Consult can review your group's transfer pricing position and help you prepare for where international tax rules are heading. Contact VOG Global today. Suite 060 to 061, Orago Complex, Area 10, Garki, Abuja.