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Sustainable Development must put people not profits first
by UN Working Group on business and human rights
July 2017
Governments and business leaders must put people – not profits – first as the world moves towards action on the UN’s Sustainable Development Goals, UN human rights experts have today told a major world conference in Paris.
Human rights must be embedded in policies and practice as countries begin to translate the ambitious global goals into concrete measures, the experts told the annual OECD Global Forum on Responsible Business Conduct.
“A development path in which human rights are not respected and protected cannot be sustainable, and would render the notion of sustainable development meaningless,” said Anita Ramasastry, one of the five members of the UN Working Group on business and human rights.
The goals, agreed by world leaders as part of the UN’s 2030 agenda for sustainable development, envisage partnerships between the private sector and governments as part of efforts to solve the world’s development challenges.
However, unless these business contributions are based on accountability and respect for human rights, the private sector risks undermining rather than supporting sustainable development, the UN experts stressed.
“For example, if a green energy project leads to displacement of an indigenous community without their consent, proper consultations and redress, the term ‘sustainable development’ rings hollow,” said Dante Pesce, another member of the UN expert group speaking at the conference.
When business activities respect people’s rights, the potential positive contribution to realizing development for all can be tremendous, the group underlined.
“Businesses can play a positive role simply by being responsible,” Mr. Pesce said. “For example, on the goal of achieving gender equality, if a company finds that its employment practices discriminate against women, and then takes effective steps to end this human rights abuse, this will make a real and significant contribution to sustainable development by advancing women’s role in economic life.”
Ms. Ramasastry added: “States are in the driver’s seat for setting development priorities in line with the UN Sustainable Development Goals. If they are working in partnership with the private sector, they must ensure that the firms involved are taking steps to respect human rights across their operations.
“The most powerful way for businesses to accelerate development is to embed respect for human rights across the whole of their operations and value chains.”
The UN Working Group presented a set of key recommendations designed to inform a series of international meetings this summer that have sustainable development on the agenda, including the current OECD global forum in Paris, the G20 summit in Hamburg and the UN High-Level Political Forum in New York on 10-19 July. The role of business in sustainable development will also be on the agenda of the annual UN Forum on Business and Human Rights in Geneva on 27-29 November.
The UN experts stressed that the UN Guiding Principles on Business and Human Rights provide a clear roadmap for protecting and respecting human rights in the context of business.
June 2017
Should business participate in the process towards a UN treaty on business and human rights, by Carlos Lopez, International Commission of Jurists Senior Legal Adviser.
This would seem a rhetorical question and the answer self-evident. Businesses, in particular big businesses, or their lawyers normally follow up closely key developments of policy and law at the international level that would have an impact in the way they operate.
So, why would they want to stay away from negotiations on global binding rules on respect for human rights? Surprisingly, some businesses (or their representatives) seem to think it wise to effectively boycott the process.
At a recent public panel at the Notre Dame University Gateway in London on possible and viable content of the prospective treaty now under discussion in the United Nations in Geneva, the argument was made that maybe businesses should not come to the table. That was astonishing.
The UN processes are by nature intergovernmental – only States vote and decide. But non governmental organizations are formal stakeholders in these processes.
All NGOs accredited by the UN Economic and Social are entitled to engage at various levels with the UN Human Rights Councils and its bodies, including the Open Ended Working Group negotiating the Business and human rights treaty.
There are also means for non-ECOSOC accredited civil society groups and individuals to participate.
These non-governmental actors are allowed to speak in the meetings, raising issues, posing questions, making substantive proposals and formulating recommendations.
Although treaties are negotiated and adopted among States, it is a long established practice to have civil society at large and other key actors as participants in the process of formation and implementation of international law.
Businesses as profit seeking organizations do not have the same nature and objectives as non-governmental human rights organizations. But their participation and “buy in” is important. There is no real obstacle to such participation.
Global and even domestic business associations can participate in UN debates, and they can do so with a delegation as sizeable as they wish it to be.
If necessary, some NGOs that work close with the business sector typically help businesses to have a place in the room. So, there is no issue about not having access or a place in the discussions.
Then, why are now businesses worried and what is their demand? Current business stance suggests that they want a special status and place in the negotiations.
The suspicion is that they would prefer the backroom and the direct lobbying to authorities in countries’ capitals to exert decisive pressure in States positions and vote during the negotiations.
Many business enterprises do not seem interested in taking part in open, transparent and democratic processes where their positions are exposed and subject to public scrutiny.
If such is the true attitude of the business community or even of a sector of them, it would be unfortunate and counterproductive.
Backroom lobbying and blackmailing to weak or corrupt States can only spur accusations of creeping “corporate capture” of governmental authority and accentuate the current public opinion distrust of big corporations and their tactics and feed into the current backlash against economic globalization.
The ICJ and other organizations have been trying for months to convince a group of business leaders to come to Geneva for meetings with States and civil society groups ahead of the official intergovernmental meeting of October 2017.
The meetings would be a unique opportunity to hear their views as to the contents of the future treaty. Very few have responded positively.
The reluctance by business sector actors to attend consultations with civil society and states is counterproductive. They are missing the opportunity to exercise the “corporate citizenship” that they claim so often.
More importantly, they will lose the moral ground to complaint that they have not been consulted in the elaboration and negotiation of treaty texts.
If they willingly choose not to participate in the meetings and consultations, it will be difficult for them to complain later that they have not been consulted.
May 2017
Strong call by Treaty Alliance as UN process enters new phase. (FIAN International, agencies)
To be successful, the next session should encourage constructive negotiations between States about concrete and detailed elements of the future treaty, so too for the establishment of a road map for their completion, says the Treaty Alliance.
The UN Open-ended Intergovernmental Working Group (OEIGWG) on Transnational Corporations and Other Business Enterprises with Respect to Human Rights will be holding its third session October 23-27, 2017. With two successful sessions behind it, negotiations will now begin on the basis of a draft presented by the OEIGWG Chair-Rapporteur. As discussions are expected to get more detailed and concrete, constructive and cooperative States’ participation is needed.
The previous two sessions (2015 & 2016) allowed a rich debate and contributed to the identification of a common ground for further progress in the elaboration of the treaty: the primary obligation of States is to protect people’s rights, including extraterritorially, over anything else. At present, regulatory gaps are leading to human rights abuses and violations as well as appalling impunity. Globally, a number of corporations are engaged in operations that result in deep environmental harm, land grabbing and use of slave labor, to mention just a few such examples.
As echoed by the recent statement, which calls for further people’s support, “the introduction and regulation of corporations’ liabilities nationally and internationally is needed so that States finally start meeting their obligations to protect human rights and the environment against harmful activities of transnational corporations and other business enterprises”.
Not only is States’ commitment to the process crucial for the success of the session, but also the mobilization and solidarity of all peoples.
* The Treaty Alliance has been working together towards a legally binding instrument since 2013, when it first released a series of demands, including the passage of a UN Human Rights Council Resolution to establish an IGWG with a mandate to develop the treaty.
Six ways business can help deliver the Sustainable Development Goals.
Transparency International is well-known for its advocacy of greater transparency and accountability in business and believes business plays an important role in ending the corruption that too often hurts the vulnerable and exacerbates poverty.
Huguette Labelle, the former chair of Transparency International, was invited to speak at the opening session of the UN Sustainable Development Goals Business Forum. She used this opportunity to reinforce our calls for a more transparent and accountable private sector and reminded the audience that achieving Goal 16: Peace, Justice and Strong Institutions, its anti-corruption component, is essential to the success of all the other goals.
Here are six ways business can set an example:
1. By being conspicuously transparent, operating with integrity and accountability in all operations.
2. By publically disclosing and regularly monitoring strong anti-bribery and anti-corruption systems throughout all operations and those of subsidiaries.
3. By publishing financial accounts for each country of operations and publishing clearly what is paid to each government in taxes, concession fees and other contributions. This not only builds trust in the company but is also a deterrent to extortion and people can see if the money paid by business to governments is accounted for.
4. By listing who the real beneficial owners of their company and their subsidiaries are, and by promoting with governments the establishment of public registers of beneficial owners.
5. By supporting and promoting governance reforms in all state institutions at all levels including at the local level to ensure that they perform well and for the betterment of society.
6. By initiating and supporting collective action with civil society organisations, labour, academic institutions and governments, business can multiply the capacity for action.
One of the indicators for measuring SDG 16.5 – substantially reducing bribery and corruption by 2030 – puts businesses on the spot. It specifically wants to measure the reduction in private sector bribery by reducing the “proportion of businesses that had at least one contact with a public official and that paid a bribe to a public official, or were asked for a bribe by those public officials during the previous 12 months.’
Transparency International has been assessing corporate transparency since 2008. We continue to push for public registers of corporate ownership, most notably with the Group of 20 largest economies who have promised much but still failed to deliver.

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Squeezing the State: corporate influence over tax policy, impacts on national & global inequality
by Kate Donald
Center for Economic and Social Rights
July 2017
Reducing inequality is one of the central pledges of the Sustainable Development Goals (SDGs), appearing as a stand-alone goal (SDG 10) and as a cross-cutting commitment to “leave no one behind”. Reducing inequality requires resources; both (re)distributing currently available resources more fairly, and raising more resources to invest in goods and services which tackle inequality.
Taxation is an essential tool for governments to achieve both of these objectives; hence the inclusion of fiscal policy in target 10.4 (“Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality”). But so far, corporate tax abuse closes off both these essential channels for reducing inequality.
The SDGs do not explicitly mention the need for redistribution, but fiscal policy can only really reduce inequality if it is redistributive, with progressive taxes (whereby high-income earners pay higher rates of tax) and pro-poor social spending.
Certainly, it is clear that the current way that resources are distributed (skewing increasingly and obscenely to the very richest) is a major factor in the global inequality crisis which the SDGs seek to tackle.
On the other hand, the SDGs do recognize the need for raising more resources – SDG 17 (and indeed the Addis Ababa Action Agenda) is largely focused on how to find the money to finance the SDGs, and places a particular emphasis on domestic resource mobilization.
At the same time, we have increasing evidence to show how government investment is a crucial determinant of inequality; public services reduce inequality and provide ‘virtual income’, whereas recent austerity measures which have slashed investment in public services have increased economic inequality in those countries.
Corporate tax avoidance and evasion (or tax ‘abuse’ collectively) close off both these essential channels for reducing inequality. They both perpetuate the mal-distribution of resources upwards – to multinational corporations, chief executives and major shareholders – and deprives countries of revenue they could use to progress towards greater equality.
This type of corporate behaviour also affects inequality between countries (which SDG 10 also pledges to reduce), disproportionately draining developing countries of potential revenue, and perpetuating the unequal status quo in global economic power and governance.
Role of corporate power
Corporate tax abuses do not happen in a political vacuum, and the legal loopholes corporations use to evade taxes do not spring up independently. The largest corporations have a huge amount of political power, and they therefore play a major role in pushing for tax loopholes, tax incentives, financial secrecy regimes and other tax-related policies which benefit them.
There is a striking lack of transparency in most countries with regards to corporate lobbying and influence over policy decisions. By its nature, corporate influence is usually denied or concealed. However, there are certain contexts where corporate power over tax policy has been studied and/or quantified. Recent findings from Oxfam America show that from 2009 to 2015, the USA’s 50 largest companies spent approximately US$ 2.5 billion on lobbying, with approximately US$ 352 million spent lobbying on tax issues.
Meanwhile, they received over US$ 423 billion in tax breaks; US$ 1,200 for every US$ 1 they spent lobbying on tax issues.4 Also in the US, researchers have found that increasing registered lobbying expenditures by 1 percent appears to lower effective tax rates by up to 1.6 percent in the following year for the average firm.
Taking the long view, since 1952 corporate profits as a share of the U.S. economy have risen from 5.5 to 8.5 percent, while corporate tax revenues as a share of the economy have plummeted from 5.9 to 1.9 percent.
The Instituto Centroamericano de Estudios Fiscales (ICEFI) has shown how elites in many Central American countries (including from corporate sectors like finance, agribusiness, coffee and other export-oriented sectors) have used their influence to fight for favourable fiscal policies, block tax reforms and preserve loopholes and offshore arrangements.
Oxfam Peru has demonstrated how the mining sector there effectively ‘captured the State’, using its power to prevent reforms which would crack down on tax evasion, force mining companies to pay back unpaid tax debts, or impose new taxes in the midst of soaring metal prices.
Beyond tax-specific lobbying, the detrimental political and economic effects of corporate lobbying have been starkly shown in several other cases. For example, a working paper by IMF staff found that lobbying by the financial industry could have contributed to the global financial crisis 2007/2008, as it was associated ex ante with more risk-taking and ex-post with worse performance.
Domestic effects on economic inequality
The prevalent policies and practices which allow corporations to avoid paying their fair share of tax include low effective rates of corporate taxation, tax incentives such as tax breaks and subsidies, lack of transparency in corporate ownership and reporting, financial secrecy policies, and loopholes in tax policy which allow huge write-offs or profit shifting/minimization.
These methods have resulted in vast sums of potential revenue lost to government coffers:
Corporate income tax rates have declined in both developed and developing countries by around 15–20 percent over the past three decades.
It is estimated that US$ 138 billion in revenue is lost annually in developing countries through corporate tax incentives.
Corporate tax abuses facilitated by loopholes, lack of transparency and tax havens deplete revenues of developing countries yet further:
US$ 100 billion annually through tax avoidance by multinational enterprises, according to UNCTAD; US$ 212 billion per year through corporate base erosion and profit shifting (tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax jurisdictions) according to IMF economists.
These figures in many cases represent more than developing country governments receive in Official Development Assistance (ODA), and compare to significant portions of their GDP, especially of their public services budgets.
For example, in Zambia, combined losses from profit-shifting in the mining sector may equal as much as US$ 326 million annually, equivalent to about 60 percent of the 2015 health budget.
The result of such corporate maneuvers is less government revenue to redistribute towards those who badly need it, and to pay for goods and services which help to equalize upwards (for example, public services and social protection).
These policies and practices therefore stymie efforts towards greater equality and are in direct conflict with several SDG targets – in particular targets 10.1 (“By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average”) and 10.4 – and undermine or hinder the achievement of many others (e.g., those that relate to public services or social protection and even gender equality and poverty reduction).
As described above, this situation also creates a kind of inequality trap, whereby growing economic inequality heightens political inequality, which then increases the ability of corporations and rich elites to manipulate policy-making to protect their wealth and privilege, while the power of labour unions, for example, is increasingly eroded).
A badly-resourced government also has less capacity to regulate corporate behaviour, to collect and audit taxes, and to shape the market in positive, human-rights compliant ways.
International effects
In addition to the myriad effects on domestic inequality, corporate capture over fiscal policy in one country can have profound effects internationally.
This has been the case, for example, when corporations have lobbied for corporate tax ‘incentives’ as a precondition for investment – creating a ‘race to the bottom’ in terms of corporate tax rates and incentives from countries competing for investment.
Low-income countries which rely more heavily on revenue from corporate tax (but also desperate for foreign investment) are particularly badly affected.
Countries’ tax and finance policies have huge ‘spillover’ effects, especially those of rich countries with the greatest say over global economic governance.
For example, when countries such as Switzerland, the UK, or the USA preside over financial secrecy jurisdictions (tax havens) where corporations can easily move their money to avoid or minimize taxable income in the countries where they operate, the effects are felt around the world.
The tax abuses enabled by such jurisdictions and policy regimes represent a huge drain on developing countries, constraining their spending power, policy space, economic space, and furthermore their ability to reduce inequality.
The impact is felt by real people in these countries; in particular, the poorest and most disadvantaged people bear the brunt, through lack of investment in poverty reduction, public and social services, and environmental protection.
Often, progress towards greater gender and economic equality is threatened as a result, and violations of people’s rights (for example to education, health, water and sanitation) may be worsened or perpetuated.
As well as reinforcing or exacerbating inequalities within countries, cross-border corporate tax abuse undermines another stated aim of SDG 10 – to reduce inequality between countries. It operates like a magnified, international version of the vicious circle of economic and political inequality described above.
By draining poorer countries of resources, it constrains the economic and political power of these countries, hindering their ability to push for meaningful changes in the international tax system or global economic governance.
So, for example, developing countries’ demand for an intergovernmental tax body has been resisted by rich countries, who insist that global tax rules should continue to be set within the Organisation for Economic Cooperation and Development (OECD) where they have effective control.
Target 10.b of the SDGs pledges to “Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest”.
Currently, due to policies and practices which enable multinational corporations to avoid paying taxes where they make profits or extract resources, the opposite is happening. Finance is flowing out of the States where need is greatest, often to tax refuges in very wealthy States.
Bringing human rights to bear in countering corporate capture of tax policy
In recent years, corporate CEOs gathered in Davos for the World Economic Forum have bemoaned rising economic inequality, while at the same time, many of these same corporations go to great lengths to evade or minimize their tax responsibilities.
Many multinational corporations are rushing to join multi-stakeholder partnerships for the SDGs, encouraged by many governments’ uncritical embrace of the idea of the private sector as the benevolent engine of SDG implementation.
Tellingly, only a small fraction of these partnerships are devoted to SDG 10 – the least out of any of the 17 goals, by a significant margin – while by far the largest number of partnerships have been registered for SDG 8 on economic growth where business entities naturally have a vested interest.
The amount of taxes corporations pay, and where they pay, has profound effects on human rights and inequalities. How can the status quo of rampant corporate tax evasion and avoidance be remedied? This is not just a ‘corporate social responsibility’ issue (although it would be a step in the right direction for more large companies to recognize that paying a fairer share of taxes is an indispensable part of being a ‘good corporate citizen’). It is ultimately the role and indeed obligation of governments to prevent tax abuse and to regulate corporate behavior.
In this area, human rights obligations – including extraterritorial obligations – can be of real strategic and moral value. There are many initiatives in the human rights field to address and rein in corporate behaviour that is infringing on human rights enjoyment.
The UN Guiding Principles on Business and Human Rights were endorsed by the Human Rights Council in 2011. Unfortunately, they do not mention corporate tax practices, but this deficiency could potentially be remedied in the national action plans being developed for their implementation.
In the meantime, there are ongoing efforts to negotiate a binding human rights treaty on transnational corporations and other business enterprises (with significant resistance from several UN Member States, notably the USA and the EU).
The Committee on Economic, Social and Cultural Rights (CESCR) has drafted a new General Comment on business activities, which provides an authoritative interpretation of what States are obligated to do under the International Covenant on Economic, Social and Cultural Rights to regulate corporate behavior, including to tackle tax abuses.
Meanwhile, human rights monitoring bodies are beginning to tackle tax policy and tax abuses as a serious human rights issue. For example, the Committee on the Elimination of all forms of Discrimination Against Women recently challenged Switzerland on the detrimental impact its financial secrecy policies have on women’s rights and sustainable development in poorer countries.
The CESCR similarly expressed alarm about several aspects of tax policy in the UK, recommending that the country take strict measures to tackle corporate tax abuse. Pursuing accountability through human rights bodies is therefore one way forward with increasing potential.
In terms of targets for advocacy, domestic tax reforms are badly needed in many contexts, to make the tax system fairer and to crack down on tax abuse, but collective action at the global level is also indispensable.
In a situation where capital is highly mobile and multinational corporations sprawl across borders, no country can tackle these issues in a vacuum. All countries have a role to play, but rich countries who effectively set the rules of the global marketplace and serve as home State to many of the most powerful multinational corporations have particular responsibility. Those countries that preside over tax havens are even more culpable.
Target 10.6 pledges to “Ensure enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions”.
A more democratic, egalitarian decision-making system with regard to tax is badly needed to remedy many of the problems outlined above and facilitate progress towards SDG 10.
An intergovernmental UN tax body, for example, in which all countries have an equal seat at the table (unlike the OECD) should be empowered to rewrite the rules of the broken international tax regime – in particular to redistribute the right to tax capital in a fairer way.
Human rights arguments are increasingly being brought to bear in efforts by G77 countries and civil society groups to push for more equitable tax policy governance at the international level.
In order to tackle outsize corporate influence over tax policy, stricter transparency requirements will be essential. This includes more stringent disclosure and reporting laws regarding corporate lobbying, political donations and access to policy-makers and policy processes, at the national and international level (for example at the OECD, UN or G20).
But it will also require broader, more sweeping reforms regarding corporate financial transparency – for example compulsory registries of beneficial ownership, country-by-country reporting, and automatic exchange of tax information.
Implementation of such measures is an essential step towards meeting the equality, governance and international cooperation goals of the 2030 Agenda, and so could usefully be included as SDG indicators.
Unfortunately similar proposals have been resisted so far at the level of the global indicators in favour of a set which is very weak on issues of corporate accountability and transparency, and international tax system reform.
However, they could still potentially be included in national and regional indicator sets for SDG 10, SDG 16 to promote peaceful and inclusive societies, access to justice and inclusive institutions, and SDG 17 on means of implemention.
Currently, domestic and international tax systems benefit big corporations at the expense of people, exacerbating inequality and undermining human rights. Corporate tax abuses and prevailing trends with regard to under-taxation of multi-national enterprises are a major obstacle to achieving SDG 10.
Indeed, by depriving countries of badly-needed revenue to spend on public services, environmental protection and poverty alleviation, they potentially threaten achievement of the whole 2030 Agenda.
SDG 10 however is particularly vulnerable, because the issue of inequality is so directly related to who controls resources, how much tax different groups pay, and who has access to power and influence over policy.
The goal of reducing inequality within and between countries simply cannot be solved by market-based solutions or attention-grabbing private sector initiatives; it requires serious efforts to transform power relations and resource distribution to stand any chance of success.
* Kate Donald is Director of the Human Rights in Development Program at the Center for Economic and Social Rights (CESR)

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