Tax justice: a human rights issue

February 14th, 2014

Tax justice campaigners understand the link between tax and poverty. The more money a government can raise, the more funds it has at its disposal to help alleviate poverty. But the realisation that tax justice is a human rights issue is only starting to get wider attention.

The UN has played a major role in this. In May 2012 its committee on economic, social and cultural rights addressed the effect of austerity programmes on human rights. It said that all states should avoid taking decisions that lead to the denial or infringement of human rights. This can lead to political instability and have a significant impact on disadvantaged and marginalised people. 

It added that states should adopt laws and policies to improve universal access to basic goods and services such as health care, education, housing, social security and cultural life. It recommended that an austerity policy should include tax measures to support social transfers to mitigate inequalities.

The committee acknowledged that international cooperation is fundamental to achieving human rights and mentioned financial institutions like the World Bank, IMF, regional financial institutions as key to this.

In September 2013, the UN Human Rights Council adopted Guidelines on Extreme Poverty and Human Rights. These say that states must use trade, investment, taxation and finance policies to help reduce poverty. The guidelines also call on countries to co-operate to mobilise the maximum available resources.

In June this year the UN Special Rapporteur on extreme poverty and human rights will submit a report on the human rights impact of fiscal and tax policy. It will make recommendations on how governments can ensure that their policies meets human rights obligations.

The UN has recognised that corporations as well as states have a role to play. In June 2012, the UN Protect Respect and Remedy framework for business and human rights was unanimously endorsed by the Human Rights Council.

Under this framework governments should ensure companies demonstrate due diligence, so that they do not impede the enjoyment of human rights. This means introducing laws, regulations and monitoring procedures, to set standards for corporate behaviour. States must also ensure effective access to remedy for the victims of corporate abuse of human rights.

Even though the guidelines are voluntary, they have already been incorporated in the OECD Guidelines for Multinational Enterprises, ISO 26000 Guidance Standard on Social Responsibility, International Finance Corporation frameworks and the EU’s 2011 communication on corporate responsibility.

The Protect, Respect and Remedy framework says that corporations must show what they are doing to put the guidelines into practice, which means they have to be transparent about the actions that they are taking.

There is an interesting debate at the moment about how to align standards for auditing companies with this framework and a two year project is underway to develop these standards. NGOs are urging full disclosure of corporate due diligence policies, to ensure that assurance standards are fully transparent.

While the Ruggie framework has been promoting transparency, the International Bar Association Human Rights Institute (IBAHRI) has spent two years investigating the link between tax, illicit financial flows and poverty.

I came across this task force in 2012, as part of my research for TJN and for my Lawyers for Better Business website, into how lawyers can take a different approach to the advice they give companies on tax.

Lawyers will tell you that they’re taught in law school how to help corporations minimise their tax liability. But this is not in fact a legal obligation. The IBAHRI report examines the impact of ‘tax abuse’ – all tax practices that harm human rights – whether legal or illegal. When the report was launched, L4BB helped to organize a conference in Johannesburg to discuss tax justice and human rights.

What can campaigners do, to hold companies accountable for human rights violations?

Lawyers and other advisers like accountants can be encouraged to alert corporations to the human rights (and reputational) harm caused by tax dodging.

Companies should include their tax policies in human rights impact assessments.

Pressure could be put on institutional investors to make sure that the corporations in which they invest pay their fair share of tax, to avoid human rights abuses.

The Sustainable Stock Exchanges initiative could help. Launched three years ago, it has eight members including the US, Brazil, South Africa and India.  Companies must meet economic, social and governance (ESG) criteria in order to register with these country’s stock exchanges. Corporate tax policies could become one of the ESG criteria.

Further information

You can find more information and resources on my website, from a conference I helped to organize in Johannesburg in November 2013, Tax Justice: A Human Rights Issue.

There will be plenty to watch out for in 2014 – including the UN Human Rights Council report mid year and Tax Justice Network publications and events on this topic.

© Adrienne Margolis

Lawyers for Better Business


Written by Adrienne Margolis

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