What do the human rights principles of equality and non-discrimination mean for tax policy? This is the question at the center of the first in a series of four advocacy tools on tax policy and human rights produced by RightingFinance.
The aim of the advocacy tools is to assist education and dissemination of the standards on tax policy and human rights contained in a report produced by the UN Special Rapporteur on Extreme Poverty and Human Rights in 2014 (“the report”). Each of them contains a section on the normative foundations of the principles in question, another on their applications to tax policy – including explanations and references to practical examples – and a third one with guiding questions for reflection.
A fundamental pillar of international human rights law and an immediate obligation of all states is the obligation to guarantee that human rights are exercised without discrimination of any kind.
Always drawing on the Special Rapporteur’s report, the publication identifies applications of the said principles to determining the degree of progressivity of the tax system. ”[C]ompliance with [the rights to equality and non-discrimination] may require States to set up a progressive tax system with real redistributive capacity that preserves, and progressively increases, the income of poorer households,” the report said. A progressive tax system is one where those with more ability to pay, pay proportionately more taxes than those with less ability to do so.
The publication also directs attention to language from the report highlighting the links between tax policy and discrimination against women. The most obvious link relates to the impact on levels of public revenue –the burden of whose reduction tends to affect women more than men. But indirect taxes may worsen inequality based on gender, as tax structures collected on the basis of inequitable gender assumptions – for instance, that women’s income is supplemental to their household.
Equality and non-discrimination also have implications for assessing the real impacts of social-spending programmes, setting the income tax threshold, and setting adequate processes for assessing differential impacts of tax policy.
Facing tax abuse is also a priority that flows from the equality imperative: “[I]f States do not tackle tax abuse, they are likely to be disproportionately benefiting wealthy individuals to the detriment of the most disadvantaged. Monitoring, preventing and punishing abuse is therefore essential in order to . . . improve the distributive effects of tax systems,” said the report.
The advocacy tools are geared towards generating a more broadly-based understanding of the critical relationship between tax policy and human rights by activists, law practitioners and enforcers, educators and citizens in general. As tax evasion scandals revealing the unjust and regressive nature of taxation rules and policies continue to erupt almost on a weekly basis, citizens around the world are waking up to the strong connection between taxation and their enjoyment of human rights.
This week it was the turn of the “Panama papers” — more than 11 million documents leaked from a secretive law firm in Panama. Exposing the maneuvers of “those who can” evade their taxes, there can be no more vivid example illustrating the human rights report’s words: “High net-worth individuals and large corporations … have a far greater ability to evade taxes as they are able to pay tax advisers, lawyers and accountants (who may sometimes provide inappropriate advice and assistance) and to open undeclared foreign bank accounts in low-tax jurisdictions.”
The toolkits end with a list of questions based on the standards the report sets, and meant to inspire reflection on specifics of tax systems in different times and places. For instance, what proportion of tax revenue comes from indirect vs. direct taxes? Do the equalizing impacts of cash transfers or social programmes extend, balance or get offset by the effects of the tax measures in place to fund them? Do indirect taxes, based on the goods affected or exempted, have a differential gender impact? The answers will likely be different for each case, and help set the context and priorities for political, legal and other forms of citizen action to analyze and influence tax reform. The goal is not to prescribe a one-size-fits-all approach to human rights-based tax policy, but to unleash the creative power of human rights as a tool for socio-economic transformation.
Stay tuned for the coming advocacy tools in the series, which will focus on maximum available resources and non-retrogression, on civil and political rights and on international cooperation for the achievement of human rights.