Tepech East Gonja, Ghana - Photo by William Vest-Lillesøe

By:

Sara Jespersen (IBIS), Rodolfo Berajano (Latindadd) and Cathrine Poulsen-Hansen (The Danish Institut for Human Rights)

The link between corporate tax policies and human rights may not seem intuitive, but it should be. While the core corporate responsibility standards have yet to better adopt the issue, the United Nations has made significant strides towards clarifying roles and responsibilities on the matter. Further, more attention will be paid to the topic in the future, in particular in the global south where the adverse effects are felt more severely and tax justice activists are getting more engaged. It is an agenda that emerges from a broken ruleset for international tax. 

The business and human rights agenda has seen significant advancement and development since the adoption in the United Nations (UN) of the UN Guiding Principles on Business and Human Rights (UNGPs) in 2011 (1).  Thanks to the UNGPs business respect for human rights, is becoming the global minimum standard that we have come to expect and respect. It significantly increases learning and understanding within the corporate sector of how their activities are connected to human rights – including when it comes to the human rights impacts connected to their tax policies and planning. Business respect for human rights will mean real differences in the lives of the many people who still suffer negative impacts on their human rights every day as a result of corporate activities. 

While the UNPGs are the globally accepted minimum standard for business and human rights, due to their voluntary basis, implementation of the UNGPs is still weak. With better implementation, or a conversion to a mandatory standard, the link between taxes and human rights might be better recognised. Unfortunately, the link to corporate taxes still needs further clarification and development within the human rights and business agenda.

Fiscal policies and human rights

Fiscal policy is a core instrument for realising human rights and setting priorities for the societies and societal structures that enables men and women to enjoy their human rights. This is recognised in a number of UN reports and studies.  

Understanding fiscal policies and inhibitors for gathering tax revenue is a part of fighting the structural causes to poverty. Transparent fiscal policies are also a core democratic instrument of accountability. Their impacts are gendered and they can diminish or exacerbate inequality. Fiscal policies have a direct bearing on who enjoys which rights and to what extent. Firstly, the states ability to raise enough revenue to enact its state duty to protect human rights is the obvious link. Secondly, how the state choses to raise and spend these revenues has a bearing on different groups in society and inequality among them. Examples include encouraging investments in infrastructure to assist physically handicapped people through tax deductions, or increasing access to healthcare or education by financing thee through taxes or through private insurances or fees, etc. 

Finally in the domestic context there is a strong governance and accountability component. Political rights and democracy is at the core of human rights and this is a very important dimension where transparency in budgets and fiscal policy instruments empower citizens to hold their governments to account for their state duty to protect, respect and fulfil human rights (2).  

In support of this, the UN, through the Human Rights Council, have adopted some key resolutions that establish more clearly the relationship between human rights and corporate tax contribution (3). These underline the importance of tackling the financial outflows often due to the tax planning of multinational corporations (MNCs), as they pose greatest challenges for states in ensuring they have resources needed to to achieve the objectives of post-2015 development agenda. 

A flawed tax system calls for corporate leadership

As our economy has gone global so have private actors. Companies now operate in several countries under the same brand and as a part of the same “group” – also known as MNCs. However, the international tax rules have not been able to adapt to this level of globalisation. While governments come to terms with the (albeit unintended) consequences and spill-overs of their fiscal regimes in a global world, demands are growing for private actors to assume their corporate responsibility also for their impacts on tax revenue through their tax policy and tax planning activities. 

MNCs as other private actors are expected to respect human rights, which requires due diligence and this includes identification of human rights impacts. Human rights due diligence served to shed light on the negative impacts on human rights caused by business activities, and can enable effective remedy to those affected. As implementation improves, more systematic collection of data can be gathered and analysed and will enable more effective regulation where needed. In a global world of broken international tax rules MNCs should remember to include in their human rights due diligence an assessment of the potential negative impacts of their tax policy and practice. As long as national tax systems remain fragmented, and MNCs can trade with themselves within their group as separate entities, there is a relevance for stakeholders to take an interest in how an MNC exercise human rights due diligence and take decisions related to tax policy and planning. It requires reflection and conscious and transparent decision-making from corporations to act responsibly also with regards to tax policy and when understanding the human impacts of their activities and internal decision-making. 

While we are seeing moves towards more responsibility on responsible taxes being placed on companies by public and private investors, there is no gold standard for how to be a responsible company when it comes to tax. Preferably, international tax rules would improve to eliminate the need for explicit corporate responsibility actions in this field. But while we wait, corporate leadership is badly needed.  A bare minimum of responsibility in this area must be to included in the human rights due diligence of each individual company. This includes company policies, in company  identification, assessment and addressing of human rights impacts as well as in company communication and reporting.

Action for change

Global campaigners for human rights and tax justice have begun work on the intrinsic relationship between fiscal policy and realization of human rights and agree on the need for new international mechanisms and binding rules governing the behavior of businesses to avoid tax abuse. At the end of April in Lima, Peru, activists and experts are meeting to define joint strategies to advance the understanding of the intrinsic link between tax justice and human rights at the international conference “'Advancing Tax Justice-through Human Rights ". 

The responsible companies of the future who wish to contribute positively to sustainable development are encouraged to not only effectively adhere to the UNGPs, but also to consider their role in perpetuating some of the structural causes of poverty. They should reflect on the findings of their human rights impact assessments and the sustainability of the financial dimension of corporate responsibility – such as contributing to the societies in which they operate with fair and transparent tax policies and payments. 

References

1: UNGP

2: http://www.ohchr.org/Documents/Issues/Poverty/ContributionsFiscaltaxpoli...

3: http://www.ohchr.org/EN/HRBodies/HRC/RegularSessions/Session26/Documents...

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