Cracking down on tax abuse will help promote economic and social rights by CESR, Business & Human Rights Resource Centre 12:18pm 30th May, 2015   June 19th, 2015    After seven days of coordinated activities in some 43 countries, the Global Week of Action for #TaxJustice has culminated in the release of the Lima Declaration on Tax Justice and Human Rights.    The Lima Declaration, already endorsed by over 100 organizations worldwide, calls for deep reforms to tax policies and practices to bring them in line with human rights standards and principles.    THE LIMA DECLARATION ON TAX JUSTICE AND HUMAN RIGHTS    We come together as a broad-based community of experienced advocates, practitioners, activists, scholars, jurists, litigators and others committed to advancing tax justice through human rights, and to realizing human rights through just tax policy.    Tax revenue is the most important, the most reliable and the most sustainable instrument to resource human rights in sufficient, equitable and accountable ways.    The realization of all human rights, likewise, is a core raison d''être of government. It is through respecting, protecting and fulfilling civil, political, economic, social, cultural and environmental rights that the state earns its legitimacy to tax.    Taxation also plays a fundamental role in redistributing resources in ways that can prevent and redress gender, economic and other inequalities and reduce the disparities in human rights enjoyment that flow from them.    Moreover, a just system of taxation can cement the bonds of accountability between the state and its people, fostering governments to be more responsive to the rights and claims of those to whom they are answerable.    Tax policies can likewise counteract glaring market failures and protect global common goods – not least a healthy environment within planetary boundaries.    Yet many countries struggle to collect sufficient tax revenue to adequately fund the realization of human rights, all of which come with some financial cost. In parallel, unjust tax systems at the national and global levels continue to fuel rising inequality and widening disparities in human rights enjoyment, shifting the burden of financing public services onto society´s least well-off, weakening the provision of existing services and concentrating wealth in the hands of a privileged few.    Regressive fiscal policies being pursued in many countries across the globe from North to South are a serious threat to the economic and social rights of already disadvantaged groups. This basic injustice is fuelling deeper economic, gender, and political inequalities, eroding trust in government institutions, which are perceived as more accountable to transnational economic elites than to their own people.    Tax policy is public policy, and so can no longer be treated as a matter of mere technical engineering or be left entirely to the often unaccountable discretion of government.    Instead, we call on governments to cultivate transformative social and fiscal compacts, and empower citizen watchdog institutions that have the purpose of subjecting tax policy to the most rigorous standards of transparency, public participation, and meaningful accountability in line with internationally-recognized human rights principles.    Existing human rights standards provide a normative justification for a capable and well-resourced state. In order to comply with their obligations to protect and progressively realise economic and social rights, states must use and generate the maximum available resources (especially through sufficient and sustainable taxation) in equitable, non-discriminatory ways.    Tax laws, policies and practices must work to end structural discrimination rather than entrench growing inequalities of all kinds, including gender, ethnic, and economic disparities. Indeed, taxation is a key instrument for addressing discrimination against women and ensuring their substantive equality.    Regressive revenue-raising measures (including those which effectively impose a disproportionate fiscal burden on the most disadvantaged within and between households and disregard individual ability to pay) as well as socially-useless tax incentives and relief for business and the wealthy that have the effect of shifting the tax burden to those less able to pay while relieving those more able to pay, are inconsistent with the human rights principles of non-discrimination and equality.    We call on governments to conduct impact assessments of the human rights and equality implications of tax laws. Likewise, we urge governments and statistical agencies to collect individual, household, and corporate data that enables decision-makers to accurately evaluate the human rights and equality impacts of all fiscal policies.    Today’s international corporate tax system – put in place when the nature and composition of the global economy was fundamentally different – is thoroughly outdated, privileging the interests of multinational corporate groups, global financial interests and some advanced economies while preventing national governments from raising sufficient revenue in non-discriminatory and accountable ways.    Rigorous, evidence-based scrutiny of the impacts tax laws, policies and practices have on human rights and equality abroad should replace the all-too-often unsubstantiated assumptions about the economic benefits of maintaining the prevailing international tax system.    Grounded on states’ existing legal duties to take steps individually and through international cooperation and assistance to achieve the full realization of human rights, we call for the rewriting of global tax rules under the auspices of a legitimate, fully inclusive and democratic United Nations global tax body.    A state implementing tax policies or practices that erode the capacity of other states to resource human rights (whether by means of preferential tax rulings, preferential corporate tax regimes for internationally mobile forms of capital, or any other means) may be in violation of this international legal duty to cooperate.    Further, states which purposefully obstruct tax information exchange, as well as banks and law firms that exploit secrecy arrangements to the detriment of the public purse, are foreseeably depriving other states of the resources needed to meet their human rights obligations.    We therefore call on states to conduct human rights impact assessments of the spill-over effects of their tax policies on other countries, to take immediate action to halt any harmful practices, and to provide effective remedy where harm is done.    Likewise, we call on states to enact legislation to regulate transfer pricing mis-practices, and to curtail financial and banking secrecy so as to enable governments to effectively combat tax abuse.    Business behaviour—and tax advice—that place tax revenues at risk may well deprive states of the resources they need to realise human rights. Therefore, the tax behaviour of business can no longer be treated outside the purview of the corporate responsibility to respect human rights.    In order to implement their obligations in accordance with the United Nations Guiding Principles on Business and Human Rights, we call on governments to develop legal and regulatory frameworks which safeguard against the human rights risks of business tax behaviour.    We also call on governments to provide effective remedy for any harmful conduct stemming from tax behaviour.    In parallel, we urge companies and corporate groups to assess and address corporate tax abuse, for example in their policy statements, due diligence and grievance processes. Starting from a clear recognition of the adverse human rights impacts of tax abuse, companies should then conduct their tax arrangements in transparent and accountable ways so as to not jeopardize government revenue collection, even when such arrangements are technically lawful yet contravene human rights principles.    We especially call on suppliers of schemes which may put government revenues at risk (in particular tax lawyers, accountants and financial intermediaries) to avoid colluding in tax abuse, to recognize their particular human rights responsibilities, to conduct human right due diligence, and to redress any harmful activities.    Further, we call on companies of all stripes to refrain from interfering in the public interest of tax policy-making, be that directly through special-interest lobbying or indirectly through provoking tax competition.    We call on international institutions to support the reform of the broken global tax system by, amongst other things, integrating human rights standards into how they address corporate tax avoidance and the adverse spill-over effects of certain governments’ tax policies.    Likewise, international financial institutions which advise governments on their tax and fiscal policies should, above all, respect those governments’ human rights obligations.    Rather than be an obstacle, the law should be transformed into an instrument of tax and fiscal justice. We urge the legal profession (including human rights and tax lawyers, judges and the judiciary at large) to consider its particular responsibilities to oppose unjust tax policies that impede the realization of human rights.    One of the human rights community’s most urgent challenges is to ensure states are accountable for equipping themselves with the material means for the fulfilment of human rights. We therefore call on the human rights community at large (e.g. advocates, lawyers, academia, women’s rights organizations, NGOs, trade unions, national human rights institutions, treaty bodies and regional commissions) to actively examine how tax practices affect their missions, and develop capacities and practices to advance human rights through closer monitoring and review of tax policy.    Whistleblowers and other tax justice advocates who work in the public interest to expose blatant tax-related human rights abuses, meanwhile, should be considered human rights defenders, and protected accordingly.    Finally, we call on the tax justice and development communities at large to integrate human rights into their research and advocacy, so as to harness the power of invoking human rights discourse, norms and accountability mechanisms in the pursuit of just taxation and sustainable development.    Academics Stand Against Poverty, ActionAid, International, Alliance Sud, Switzerland, Association For Women''s Rights in Development (AWID), Asian Peoples Movement on Debt and Development, Philippines, Business & Human Rights Resource Centre, Center for Economic and Social Rights (CESR), Center for Women''s Global Leadership at Rutgers University (USA), Christian Aid, European Federation of Public Service Unions, International Bar Association''s Human Rights Institute, Kenya Human Rights Commission (Kenya), Labour, Health and Human Rights Development Centre (Nigeria), Oxfam International, Transparency International France, agencies    http://www.cesr.org/article.php?id=1740 http://www.cesr.org/article.php?id=1726    Cracking down on tax abuse will help promote economic and social rights - Business & Human Rights Resource Centre    Civil Society agencies are increasingly reporting on companies that avoid paying a fair share of taxes and royalties in developing countries. This deprives governments of essential revenues that they need, in order to deliver on development, health, education, housing, access to water and other human rights.    The UK-based Co-operative Bank states: “One of the most effective ways that businesses can contribute to poverty reduction is to pay income tax in developing countries.”    This section the Business & Human Rights Resource Centre covers illegal tax evasion. It also covers instances of tax avoidance -- such as non-payment of taxes through agreements with governments, subsidies, loopholes, tax havens, creative accounting practices, transfer-pricing, etc. -- which may be legal under national law, but where concerns are raised about whether the tax avoidance harms the government’s ability to meet its human rights obligations, especially economic and social rights. And it covers a closely-related problem: many companies fail to disclose the tax and royalties they pay in each country.    Action is needed by governments, individually and collectively, to address these issues through improved laws and enforcement. But companies are responsible for their own tax practices, and that is the focus of this section.    Our “Tax avoidance” section includes links to reports by leading international and national NGOs. It includes allegations of misconduct by particular companies - and the ways in which companies are responding (or not responding) to them. It includes steps by business, statements by companies on the subject, and guidance materials.    http://business-humanrights.org/en/tax-avoidance-0    Cracking down on tax abuse will help promote economic and social rights, writes Audrey Gaughran, Director of Global Issues and Research at Amnesty International.    Vast sums of money are diverted from the public purse to private pockets as a result of tax evasion and corruption every year, but government efforts to close tax loopholes are often met with explicit or implicit threats by companies to move elsewhere, taking their investment and jobs with them.    This is an international problem, and needs an international solution. But current efforts at co-operation are limited and fail to get anywhere near the heart of the problem. Countries need to join forces in a multilateral effort to go after the bad guys, as well as making the structural and policy changes necessary to address these issues globally.    Developing the right skills and partnerships to launch and complete effective investigations is part of the solution. Recently, advocates for economic, social and cultural rights (ESC) have acknowledged the close connections between states’ human rights obligations and tax revenues, including systems that enable corporations and individuals to transfer their wealth offshore, beyond the reach of governments.    Although no international human rights treaties explicitly mention tax, all treaties with resource implications are based on the assumption that governments will marshal resources to meet their human rights obligations. This includes funds for training police officers, maintaining courts, guaranteeing free and fair elections, ensuring a functioning system of primary education, or access to health care for all.    The International Covenant on Economic and Social Rights (ICESCR) is the rights treaty with the most explicit mention of resources, requiring states to use the “maximum available resources” to realize ESC rights.    The Committee on Economic, Social and Cultural Rights –independent monitors established to track progress on ESC issues – notes that when states plead a dearth of resources, they must first “demonstrate that every effort has been made to use all resources that are at its disposition in an effort to satisfy, as a matter of priority, those minimum obligations.”    While states use a range of sources to fund public expenditure, typically most states’ revenues come from taxes. Tax receipts are therefore a critical factor in their ability to maintain sufficient social spending to discharge treaty obligations.    Some human rights experts are studying the ways states use their resources, tracking their budgets and expenditures to discover whether they are truly seeking to fulfill their human rights treaty obligations. The International Budget Partnership, for example, has been working with civil society groups around the world to analyze and influence public budgets in order to reduce poverty.    It is only very recently, however, through the work of the UN Special Rapporteur on Extreme Poverty and the Centre on Economic and Social Rights that human rights activists have begun examining state resource mobilization.    When examining “available resources,” we must look not at what is de facto available today, but what could – legitimately – be available, were governments to make the appropriate efforts. When examining “available resources,” we must look not at what is de facto available today, but what could – legitimately – be available, were governments to make the appropriate efforts.    Debates about tax evasion and avoidance, austerity, post-2015 development financing and growing wealth inequality have begun to expose where the world’s wealth is located, and who controls it. The revelations have been shocking: not only do a small number of people and corporations control massive wealth, but the systems by which they maintain and grow their wealth are often outside individual state control.    In Europe, for example, where economic crisis and the need for austerity measures are familiar issues, politicians have proposed regressive tax measures that would potentially undermine resource mobilization for human rights. In other cases, there have been disturbing revelations about tax avoidance by multinational corporations.    What this means is that money that could be used by governments to fund social spending, reduce poverty and realize human rights is being diverted into private hands through channels that are legal, although widely seen as unjust. The same systems – tax havens and offshore bank accounts - also facilitate the movement of illicit wealth.    A 2014 report by Global Financial Integrity found that the developing world lost US$6.6 trillion in illicit financial flows between 2003 and 2012, with these outflows increasing at an alarming average rate of 9.4% per year. The outflows – facilitated by, among other things, tax haven secrecy, anonymous companies, and money laundering techniques – were far greater than the total official development assistance provided to developing countries over the same period, which was $809 billion.    To date, Amnesty International has focused primarily on state failures to respect and protect ESC rights, and on discrimination in access to key goods or services, such as education. Until now, we have not focused our energies on studying how states access and use resources to meet needs and obligations for all.    Budget analysis is an important tool in this work, though such analyses are limited to what a state says - or believes - is currently available. Any analysis of how Portugal or Sierra Leone, for example, are allocating their budget would not reveal tax evasion or the movement of wealth offshore by multinationals or high net worth individuals.    Without examining these deeper issues, advocates are at risk of making simplistic recommendations that accept the resource status quo, along with significant global injustices. Ironically, many of the states providing aid to developing countries that cannot meet their ESC obligations are also home to companies taking wealth from those same poorer countries at a rate, and amount that far outstrips aid flows. They are also, in some cases, architects of the very structures – tax havens and offshore finance hubs – that enable them to do so.    If the human rights and development communities want to move beyond hand-wringing, they must get involved in in-depth, rigorous investigative work to expose, case-by-case, the invidious systems and policies that facilitate the outflow of wealth, and to connect these systems to human rights impacts.    Economic and social rights activists must focus on international solutions to tax evasion. Pointing fingers at violators and increasing international development aid budgets is not enough. And we should not leave the tax justice movement and economists to advance the agenda on ethical access to global wealth alone.    Human rights activists must also develop the skills and partnerships to be part of these tax evasion investigations and solutions.    http://www.opendemocracy.net/openglobalrights/audrey-gaughran/cracking-down-on-tax-abuse-will-help-promote-economic-and-social-ri http://www.taxjustice.net/ Visit the related web page
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