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Macroeconomic policies

Private gain, public loss: Mailbox companies, tax avoidance and human rights

The Netherlands, despite being bound by international human rights obligations, has failed to adequately regulate the human rights impact of MNCs incorporated in its territory. While states eschew regulation of businesses with regard to their human rights conduct, they often grant investors extensive extraterritorial tax and investment rights and entitlements. This is especially the case for companies that are active in high-risk sectors such as the extractive industry, argues a recent publication “Private Gain- Public Loss. Mailbox companies, tax avoidance and human rights,” by Dutch organization SOMO.

The report looks at eight large extractive Dutch companies and how the lack of adequate accountability mechanisms impacts tax avoidance in host states and direct human rights abuses. Furthermore, the report analyzes and highlights the responsibility of the Dutch state therein.

SOMO finds that subsidiaries of Dutch extractive industry companies are responsible for or associated with serious human rights abuses, ranging from environmental pollution to militia violence, killings and displacements. The majority of countries home to extractive industry operations are characterized by poverty and an unequal distribution of wealth. Research shows that progressive tax systems contribute to good administration, democratic development and poverty reduction, while large-scale tax avoidance by MNCs undermines them.

The publication argues such human rights abuses are allowed to take place because the Dutch MNCs operate globally, while binding regulation is often only applicable at the national level. The globalization of business operations with complex and opaque business structures was insufficiently accompanied in recent decades by an effective domestic and international regulatory human rights framework. However, there is a growing recognition by civil society, academia and international institutions – such as the OECD, the IMF and the United Nations – that some degree of control over the extraterritorial impacts of activities of businesses is necessary. The report concludes with a number of concrete recommendations to the Dutch government including the elimination of laws that allow for tax avoidance, an impact assessment of fiscal/investment policies in affected countries, disclosure of human rights conduct and corporate structures, and improved access to legal action for the victims of human rights abuses.

Read ‘Private Gain- Public loss’

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June 2017
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