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Taxation

Taxes, compulsory levies imposed on individuals and entities by governments, are primarily aimed at raising resources for government expenditures, although they also serve other purposes, including redressing inequalities in society. Fiscal and tax policies that are grounded in human rights can lead to poverty reduction and sustainable development.

In line with the UN Guiding Principle 8 on policy coherence, states have an obligation to ensure that their tax and fiscal policies are aligned with their international human rights obligations. Thus, states are expected to strive for coherence between corporate, fiscal, tax and human rights laws and policies, both at the domestic and international levels, and simultaneously avoid such corporate, fiscal or tax measures that have retrogressive impacts on human rights.

The Committee on Economic, Social and Cultural Rights (CESCR), in its 2017 General Comment No. 24, notes that States should ensure that corporate strategies do not undermine their efforts to fully realise the rights set out in the Covenant. The CESCR General Comment No. 24 also notes that “to combat abusive tax practices by transnational corporations, States should combat transfer pricing practices and deepen international tax cooperation, and explore the possibility to tax multinational groups of companies as single firms, with developed countries imposing a minimum corporate income tax rate during a period of transition” (paragraph 37). They should be also careful about lowering the rates of corporate taxes as doing so “with a sole view to attracting investors encourages a race to the bottom that undermines the ability of all States to mobilize resources domestically to realize Covenant rights.” (paragraph 37). Excessive protection for bank secrecy and permissive rules on corporate tax may affect the ability of host States to mobilize the necessary resources for the implementation of economic, social and cultural rights.

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Fiscal and taxation policies have also been highlighted as a major determinant in the enjoyment of human rights by the UN Special Rapporteur on Extreme Poverty and Human Rights, who in her June 2014 report to the Human Rights Council, pointed to the ways in which domestic and international tax policies implicate states’ legal obligations under human rights law. She stressed that taxation is a key tool to tackle inequality and for generating the resources necessary for poverty reduction, as well as to foster stronger governance, accountability and participation in public affairs.

Domestic public resources are considered key to achieving the Sustainable Development Goals (SDGs) of the 2030 Sustainable Development Agenda. In the Addis Ababa Action Agenda on Financing for Development, governments committed to enhancing revenue administration by improving fairness, transparency, efficiency and effectiveness of tax systems.

In practice, many countries struggle to collect sufficient revenue to fund public services essential for their populations to enjoy basic human rights, such as access to health, housing or education. Unjust tax systems, at both the national and global levels, paired with the impact of widespread tax avoidance and evasion (such as transfer pricing; negotiation of tax holidays; non-taxation of natural resources; the use of offshore investment accounts) fuel rising inequality and widening disparities in human rights enjoyment, shifting the ‘burden’ of taxation onto society’s least well-off. [IBAHRI Report: “Tax Abuses, Poverty and Human Rights.”].

While tax evasion is not a new phenomenon, scandals like the Panama Papers raised awareness about the current scale of the tax abuse and evasion, with “dozens of political leaders from all corners of the globe being implicated in large-scale tax evasion and avoidance through tax havens, effectively robbing government coffers around the world of much-needed resources that might otherwise be used to fulfill the human rights of ordinary citizens.” [CESR, Panama Papers]. While it is impossible to give an exact figure for tax revenue lost globally due to wealth being hidden in offshore tax havens, Oxfam estimates the amount to be US $190 billion, a figure that dwarfs the total development assistance by OECD countries (US $137.2 billion in 2014). In a briefing to the UN Committee on the Elimination of Discrimination Against Women, the Centre for Economic and Social Rights (CESR) and its partners highlighted the impact of cross-border tax evasion facilitated by Swiss financial secrecy on women’s rights in countries like Zambia.

Not surprisingly, tax abuse is also an increasingly important subject of discussion by the G8 and G20, with the G20 endorsing in 2013 an OECD Action Plan on Base Erosion and Profit Sharing, which states that “fundamental changes are needed to effectively prevent double non-taxation, as well as cases of no or low taxation associated with practices that artificially segregate taxable income from the activities that generate it”. Also in 2013, many G8 leaders pledged to confronting tax abuses in the Lough Erne Declaration.

Given the corporate responsibility to respect human rights, all business enterprises, including tax advisors and financial institutions, need to ensure that their tax planning strategies and services do not negatively impact human rights. Additionally, by being transparent about the payments they make to individual governments (see for example Publish What You Pay Initiative), they can contribute to fighting corruption and addressing the “resource curse”. Such transparency in some cases is also required by legal regulations such as the European Union Accounting and Transparency Directive, as well as the protocols developed under the multi-stakeholder Extractive Industries Transparency Initiative.

Tax relates to the following Sustainable Development Goals

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References

No references.

What National Action Plans say on Taxation

Belgium

Chile

III. First National Action Plan on Business and Human Rights in Chile

Normative Framework (page 20)

Business enterprises are basic economic units in society which, through their activity, may generate a series of positive impacts on society such as the creation of employment and payment of taxes which, in turn, allows the State to invest public money in the realisation of human rights.

Colombia

Czech Republic

Introduction [page 4]

“The diversity of legal systems can be a good thing as it is an opportunity to explore new avenues and it motivates governments to improve regulation. Yet if a country is too lax in the way it devises its rules, a competitive advantage becomes a threat. A fragmented and inconsistent legal regime can spawn unwelcome developments – tax avoidance (“aggressive tax planning”) for one thing, and human rights abuses for another.”

Most serious infringements of working conditions [page 16}

“Those working in other people’s households are another risk group. Such actions have fallout for employees, for the state (which is robbed of taxes and insurance contributions), and for honest businesses, who cannot compete with such labour.”

Denmark

Finland

Government covering note on the UN Guiding Principles on Business and Human Rights National Action Plan

Ownership policy and social responsibility

“Companies with a controlling interest held by the State assess the human rights risks of their own operations and those of their subcontractor chains, reporting on them and their own tax procedures. In doing follow-up work on the operating principles of social responsibility, consideration should be given together with companies and other stakeholders on how models developed in ownership steering could also be applied in other company functions.”

France

Narrative description

1. Part I, section 13 on the role of public agencies, regarding the development agency AFD (p30-31): NAP indicates that article 5,part 3 of the 7 July 2014 law on orientation and programming related to development and international solidarity policies regarding financial transparency country by country is currently not being applied in France. Financial operators and private actors working with AFD and Proparco must be encouraged to perform country by country reporting, disclosing information on turnover, profit margins, number of employees and tax paid in each country they operate in (paragraph 4, p31).

Georgia

Germany

1.2 Public procurement

The current situation [page 22]

“Following the reform of procurement law in 2016, with which three new EU procurement directives were transposed into German law, the new Part IV of the Restraints of Competition Act lays particular emphasis on observance of the law, especially taxation, labour and social legislation (sections 97(3) and 128(1) of the Act).”

Ireland

Italy

Lithuania

Objective 1: ensuring State’s duty to protect, defend and respect human rights

E. Measures related to international obligations [page 4]

2. “Accession to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The aim is to create conditions for the ratification of the Convention following Lithuania’s accession to the OECD. To successfully accede to this Convention, criminal legislation must contain a special rule providing for the liability of natural and legal persons for the bribery of foreign public officials in international business transactions. The legislation must also prohibit tax deductions from money obtained as bribes, irrespective of this money being accounted for in accordance with applicable legal requirements.”

Luxembourg

Netherlands

3.4 Transparency and reporting [page 30]

Reporting

“The government supports the growing number of international initiatives to promote transparency by means of tax disclosure. It takes an active part in discussions in the EU on a possible expansion of obligatory tax disclosure by companies operating internationally to include payments to countries where they are active. It urges attention for possible adverse economic consequences of making this information public, and for close harmonisation with existing transparency requirements.”

Norway

Poland

Pillar I: The state’s duty to protect human rights

Addition of general principles in administrative proceedings [page 22]:

On the grounds of tax law, the Constitutional Court⁹ has indicated that the public administration authorities should, in accordance with the principle of in dubio pro tributario, resolve interpretation doubts in favour of the taxpayer. On the other hand, in the context of the protection of the right to property, the Supreme Administrative Court has argued in favour of restrictive interference with the rights of the owner.¹⁰ There is no doubt that the principle of in dubio pro libertate permeates all administrative law.¹¹ By extending this principle to the level of proceedings before administrative authorities, the provisions that are questionable should be interpreted in such a way that legitimate interests of citizens are not harmed.

Appendix 1

International non-binding mechanisms and international legal framework in force in Poland in relation to business and human rights [page 55]:

Corporate responsibility for infringements of international human rights standards/norms is provided for in non-binding mechanisms. In this respect, apart from the UN Guiding Principles on Business and Human Rights, the following documents should be mentioned: “The OECD Guidelines for Multinational Enterprises: rules for different areas, from employee relations, environmental issues, respect for human rights, and occupational safety, through issues of access to information, taxation, environmental protection, and due diligence in business. The OECD Guidelines contain a dispute settlement mechanism involving the possibility of submitting notifications to the OECD NCP on the infringement of the Guidelines. The OECD NCP examines the case and, provided it has grounds to do so, recommends mediation proceedings to the parties.

Spain

Sweden

Annex: Measures taken [page 24]

The State as owner

“Like other state-owned companies, Swedfund International AB (Swedfund) and the Swedish Export Credit Corporation (SEK) are required to comply with the government state ownership policy for CSR, as described above. Moreover, Swedfund and SEK have social mandates specially adopted by the Riksdag. Swedfund is required to ensure that its investments comply with international standards and CSR principles, within clear and sound corporate structures that do not contribute to tax evasion, money laundering or terrorist financing. SEK is required to take account of conditions such as the environment, corruption, human rights and working conditions in its credit assessments”

Annex: Measures planned [page 27]

Regulations and legislation

“An inquiry has presented further proposals for modern, effective and legally certain administrative proceedings. The continued development of administrative proceedings and specialisation for tax cases (Swedish Government Official Reports 2014:76) was presented in December 2014 and has been circulated for comment.”

Switzerland

4. Position of the Federal Council on the Guiding Principles on Business and Human Rights

4.2 The Swiss context [page 6]:

Many Swiss companies are currently having to tackle a large number of challenges simultaneously: securing their competitiveness on the international markets, against the backdrop of the strong franc and the implementation of Corporate Tax Reform III and the Mass Immigration Initiative, investing in new technologies and human resources, and creating decent, well-qualified jobs in Switzerland and the wider world.

…

5. National Action Plan on Business and Human Rights

5.6 Relation to the Federal Council position paper on CSR [page 12]:

These include working conditions (including health safeguards), human rights, the environment, preventing corruption, fair competition, consumer interests, tax and transparency. The present report and NAP in fulfilment of postulate 12.3503 and the CSR position paper on corporate responsibility are therefore complementary and of equal status.

…

5.7 Pillar 1: state duty to protect

5.7.2 Operational Principles: legislative and information policy measures

Guiding Principle 3 [page 16]

PI5 Regulation of the manufacture and Import of Renewable Resources (biofuels)

The Mineral Oil Tax Act provides that biofuels (biogas, bioethanol, biodiesel and vegetable and animal-based oils) will be wholly or partly exempted from mineral oil tax if they satisfy minimum environmental and social requirements. Under the Mineral Oil Tax Ordinance, the minimum requirements for socially acceptable production conditions are fulfilled if, in the cultivation of the resources and production of fuels, business enterprises comply with the social legislation applicable at the production location, but at a minimum with the fundamental conventions of the ILO. he criteria were toughened up further with the implementation of parliamentary initiative 09.499 Agrotreibstoffe. Indirekte Auswirkungen berücksichtigen [‘Agrofuels: considering the indirect impacts’]. In the future (cf. Art. 12b para. 3 MinOTA), the Federal Council will have the right to refuse the tax exemption if biofuels have been produced in a country which does not have food security. Furthermore, the area used for cultivating the resources used to produce biofuels must have been acquired lawfully, to prevent the displacement or dispossession of the local population. Should biofuels which do not fulfil the criteria for tax relief enter circulation in large quantities in Switzerland in the future, the Federal Council may make them subject to an authorization requirement.

United Kingdom

The UK 2013 NAP makes no reference to tax.

The UK 2016 Updated NAP mentions tax in the section devoted to Myanmar Centre For Responsible Business in Burma [page 19], where it points to the tax evasion as being one of the important issues in the context of responsible business conduct:

“The media has turned to MCRB for comments on a range of responsible business issues which MCRB is using to shape debates on issues as diverse as tax evasion and environmental impacts, and to highlight international standards and key issues in Myanmar.”