“Towards an international tax agenda based on rights and equality for tax justice:
For a UN global tax body and the achievement of Agenda 2030”
Thursday, April 6th, 2017
Conference Room 12 - Conference Building, UN Headquarters
- Carola Iñiguez- Undersecretary of International Supra-regional Organizations of the Ministry of Foreign Affairs of Ecuador
- Jerry Matjila, Permanent Representative of South Africa to the United Nations
- Dennis Howlett - Treasurer, Global Alliance for Tax Justice; Executive Director, Canadians for Tax Fairness
- Manuel Montes - Senior Advisor, Finance and Development, South Centre
- Ignacio Saiz – Executive Director, Center for Economic and Social Rights (CESR)
REMARKS – Ignacio Saiz
First of all, I would like to thank Undersecretary Iñiguez and Ambassador Matjila for the invitation, and for their governments’ leading efforts to build a fairer, more cooperative system of international tax governance. I also salute you for giving this event a title that frames this discussion as a matter of human rights. Radical reform to international tax policy and practice is essential not only to meet Agenda 2030, but to unlock the obstacles all countries face in fulfilling human rights for all. I want to focus my remarks on why tax is a human rights issue, the role tax havens play in undermining human rights and how framing tax abuse as human rights abuse can help in our advocacy for global tax reform.
Why tax is a human rights issue
Taxation is a crucial instrument for the realization of human rights. Tax is the primary means by which governments generate the resources they need to invest in the public services essential for people to enjoy their human rights in practice. Taxation is also crucial for redressing inequalities of all kinds and cementing the bond of accountability between state and citizen. In countries across the globe, CESR has documented how insufficient, inequitable and unaccountable tax systems fuel human rights deprivation and inequality, shifting burdens onto society’s least well-off, concentrating wealth in the hands of a privileged few and eroding trust in government institutions, which are often perceived as more accountable to economic elites and international donors than to their own people.
Progressive and effective tax systems can revert this dynamic—mobilizing investments in human dignity and redistributing resources in ways that can check the alarming rise in economic inequality seen during the MDG period. Fair and progressive taxation is in many ways a manifestation of social solidarity, and can foster deeper, more inclusive social compacts.
How tax havens undermine human rights
Financial secrecy jurisdictions represent one of the greatest structural barriers preventing many low and middle income countries from creating sufficient, equitable and accountable tax systems in a manner which enables them to fulfil their human rights and development commitments. States are hemorrhaging public resources that could otherwise be used to realize human rights, because corporations and wealthy individuals are able to avoid paying their fair share by shifting their profits and income to countries where they can be held in secret, taxed at very low rates, or exempt from taxation altogether.
While all countries lose out, the states hit hardest by this cross-border tax abuse are those low- and middle-income countries, with the fewest resources overall, weakened tax administrations and greater dependence on corporate taxes for national revenues. Conservative estimates suggest that the total cost of cross-border tax abuse to developing countries amounts to more than $500 billion annually, far exceeding the amount of official development assistance they receive, which at its height in 2014 was a relatively paltry $135 billion.
A human rights analysis means going beyond the aggregate impact on a country’s economy and looking at the differential impacts on specific communities and population groups. The ability of wealthy individuals and corporations to avoid their tax liabilities tilts the tax burden towards the poorest and most disadvantaged sectors of the population. They are the most acutely affected when the loss of tax revenues leads to reduced public budgets, weakened public services and higher consumption and labor taxes. In all countries in which CESR has worked, women bear a disproportionate burden of these regressive fiscal policies.
For example, CESR and its allies in the tax justice movement have documented how financial secrecy in Switzerland – the world’s leading tax haven - results in the loss of billions of dollars in tax revenue in countries such as Zambia and India. Women are hit hardest because revenue shortfalls often result in cuts to public services or social protection measures on which they particularly rely, as well as increasing the burden of unpaid care work which they carry. In Zambia, combined losses from profit-shifting in the copper mining sector amount to over US $300 million annually, equivalent to about 60% of Zambia’s health budget in 2015.
CESR and its partners brought this analysis before the UN CEDAW Committee – which had previously criticized Zambia for insufficiently resourcing women’s right to health – arguing that Swiss financial secrecy laws were in breach of Switzerland’s extra-territorial human rights obligations. This prompted the Committee to call on Switzerland to undertake an assessment of the spillover impacts of its financial secrecy and tax policies on women’s rights and equality in developing countries, and to report on progress within 18 months.
How a human rights approach can help in our advocacy for global tax reform
CEDAW’s recommendation to Switzerland is an example of how international human rights bodies are increasingly scrutinizing the human rights implications of cross-border tax abuse. The UN CESCR has since expressed similar concerns about the United Kingdom. It also illustrates the potential value of invoking human rights to challenge tax havens. Human rights provide a rationale for taking action against tax abuse as a matter of human dignity and not just economic development. Secondly, they provide a detailed normative framework for assessing the legitimacy of certain tax policies and practices. Indeed human rights principles such as progressive realization, non-discrimination, non-retrogression and extra-territorial obligations can help define with more clarity what “tax justice” looks like. And thirdly, human rights provide additional avenues for accountability, through the supervisory mechanisms of human rights at the national, regional and international levels.
International human rights bodies can play a complementary role in buttressing accountability. Of course, they alone cannot remedy the deficits in global tax governance which the panelists before me have amply described. For this reason we welcome Ecuador’s efforts to promote more structural reform to the broken international tax system. In some respects, this is an opportune moment. The adoption of Agenda 2030 and the Addis Ababa Action Agenda provide a foothold for advancing bolder solutions to this collective action problem. But developments since then herald an uphill struggle, particularly with the US now positioning itself to become the world’s favorite tax haven for multinational companies.
Some have said that the most appropriate forum for overcoming this collective action problem is through the OECD BEPS process. While this process has no doubt helped to put tax avoidance at the top of the agenda in many countries, we are seeing now that the biggest winners have been precisely those wealthier countries who own the agenda of this exclusive member body, which does not give full voice to the needs of the majority of countries.
We need to replace the flurry of unilateral and increasingly nationalist tax reforms with an empowered tax multilateralism – embodied in an inclusive inter-governmental body on tax cooperation under the auspices of the UN, where all people in all countries have a voice and the space to determine their fiscal future.
Rather than competition and secrecy being the norm, the 21st Century international tax system will need to be built on the firmer framework for international cooperation that international human rights norms provide. We are committed to working with our allies in the tax justice and development communities, as well as with the progressive governments showing leadership on this issue, to bring about a more transformative shift towards “an international tax agenda based on rights and equality”.