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Blogs, Macroeconomic policies

Tax policy is human rights policy

In a recent report (“the report”), the UN Special Rapporteur on Human Rights and Extreme Poverty, Mr. Philip Alston (“the Rapporteur”) addressed the issue of economic inequality, drawing its connections to the enjoyment of human rights and to policy recommendations needed to tackle it. Among the recommendations offered in the report, some squarely focused on economic policies. States should “reduce inequality by adopting taxation policies that are instrumental to achieving that aim,” the report said. By linking economic inequality to human rights enjoyment and to the actions and omissions by the state (in pursuing a particular tax policy), the report constitutes yet another important building block in the emerging body of standards that connect acts and omissions of the state in the field of economic policy to human rights.

The greater awareness of the principle that tax policy and development go together is evident in the Secretary General’s recent report stating that “progressive tax policies can play an important role in addressing inequality and poverty and in his exhortation that Governments consider a combination of progressive income taxes and highly redistributive transfers to decrease income inequality and its impact on social development.”

But, according to Mr. Alston, the fact that tax policy is, in many respects, human rights policy, has yet to be recognized in policies in the human rights field. “Tax policy is human rights policy” was, indeed, the title of a speech delivered by Mr. Alston to an audience in Ireland earlier this year. In such presentation he put forward some explanations why economic policies tended to remain separate from human rights. Among them, the marginality of economic and social rights, and the “myth” that resource availability is irrelevant to a government’s obligations in the domain of civil and political rights. But, he said in that speech “the reality that is increasingly obvious is that many of the world’s worst human rights situations are driven overwhelmingly by economic factors.”

Last year, the same Rapporteurship (under Mr Alston’s predecessor) issued a study on tax policy and human rights. Therein it argued that since States have obligations to respect, protect and fulfil human rights in all the ways they exercise their functions, “the design, implementation and monitoring of revenue-raising policies is no exception.”

In defining economic inequalities, the Rapporteur said that they range from inequality of income to inequality of wealth. He distinguished them from social inequalities – which would relate to the distribution of political power, health, education or housing among individuals in a society. But he stressed that economic and social inequalities often interact with and reinforce each other.

The document cited a 2008 study by the International Labour Organization claiming that over the past two decades the income gap between the top and bottom 10 per cent of wage earners increased in 70 per cent of the countries for which data was available. However, the Rapporteur also said that measures focused on inequality of wage income may miss an important part of the picture by ignoring the richest whose income derives from wealth rather than from labor.

The Rapporteur clarified it does not advocate “perfect economic equality,” as there might be no reason to object to a certain degree of economic inequality “if it reflects differences in effort and talent and is instrumental in achieving greater welfare for society as a whole.” But he argued there is a consensus that every human being is entitled — at the very least — to equal opportunity. And economic inequalities, especially if they are extreme or begin at birth, are a significant obstacle to equality of opportunity: “The problem in many societies is that poor people start the “race of life” at a disadvantage and will meet many more hurdles on their way than others,” he said.

The report identified links between economic inequality and obstacles to the enjoyment of civil and political rights and between economic inequality and discrimination. In a section on inequality and human rights, the document stated that “it is clear that economic inequalities severely affect a range of civil, political, economic, social and cultural rights.” It exemplified with rights to life, security, liberty, as well as rights to health, education and water.

In line with those ideas, the document reminded that appropriate redistributive measures through taxation and other fiscal policies must be seen as an integral part of a commitment to ensuring full respect for human rights across the entire society. It quoted in this regard research by the IMF which said that “extreme caution about redistribution — and thus inaction — is unlikely to be appropriate in many cases.” “On average,” the IMF study said “the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes, unless they were extreme” and that “the resulting narrowing of inequality helped support faster and more durable growth, apart from ethical, political, or broader social considerations.”

Click here to access full report.

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May 2017
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