While all human rights are indivisible, economic and social rights entail specific principles that bear relevance for tax policy. Economic and social rights require that states devote maximum available resources to their progressive realization. The principle of non-retrogression sets forth that states should not take measures that deliberately lead to retrogression on the enjoyment of such rights. States also have an immediate obligation to ensure the satisfaction of, at the very least, minimum essential levels of economic, social and cultural rights.
A new publication by RightingFinance centers on the implications of such normative principles for tax policy. The publication is the second in a series of advocacy tools on tax policy and human rights with the aim of assisting 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 the advocacy tools 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.
States that claim to have resource constraints for fulfilling their economic and social rights obligations are required to “show that every effort has been made to move towards the full enjoyment of economic, social and cultural rights as a matter of priority, and that they are truly unable rather than unwilling to meet these obligations.” This means that, although a state has discretion to use the tax measures that are best suited to its circumstances, it has the burden of demonstrating that in using its discretion to choose the most appropriate tax measure it is not violating principles such as progressive realization or maximum available resources.
Referring to states that fail to increase revenue through taxation, the report reminded that “the quality, accessibility and availability of goods and services needed for the realization of human rights, such as the rights to an adequate standard of living, health, education and social security, will hinge on the resources that the State is able to collect.”
Economic and social rights also have implications for the use of corporate tax incentives. Tax incentives or tax holidays for corporations represent foregone public revenue in amounts frequently large, especially when compared with the human rights needs that could have been met with such revenue. Thus, “as in any case where a State is allegedly failing to use its maximum available resources to fulfil obligations to progressively realize economic, social and cultural rights, incentives would have to be justified by a clear description of deliberate, concrete and targeted advances towards the fulfilment of human rights that can be expected from their implementation.”
Regarding tax abuse, the report recalls that tax evasion levels are extremely high in many countries, with approximately USD 3 trillion of government revenue lost to tax evasion every year. “While high-income countries are the biggest losers in absolute terms, low- and middle-income countries are particularly affected by the losses, and also face particular constraints when tackling tax abuse,” the report says.
Other issues in the report that the advocacy tool addresses are taxes on the financial sector, natural resource taxes and standards for economic crises prevention and response.
A series of questions at the end invites reflection on a number of aspects to analyze when assessing human rights compliance in individual country cases: Does the state have room to increase taxes in way compatible with human rights and, if so, is it making efforts to gradually do so? If the state grants tax incentives to companies, does it abide by a human rights-based framework to assess and evaluate their benefits against revenue losses on a transparent, participatory and periodic basis? Do steps planned by the state to tackle tax evasion include seeking international cooperation, where needed, to tackle cross-border tax evasion?
Coming advocacy tools in the series will focus on civil and political rights and on international cooperation for the achievement of human rights.