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.+ Read more
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