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Library of Congress Cataloging-in-Publication Data
Title: Tax, inequality, and human rights / Philip Alston and Nikki Reisch, editors.
Description: New York: Oxford University Press, 2019. | Includes bibliographical references and index.
Identifiers: LCCN 2018038170 | ISBN 9780190882228 ((hardback) : alk. paper) | ISBN 9780190882235 ((pbk.) : alk. paper)
Subjects: LCSH: Taxation—Law and legislation. | Tax administration and procedure. | Equality before the law. | Taxation—Social aspects. | Tax evasion. | Tax protests and appeals. | Human rights.
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CONTENTS
Foreword ix
Winnie Byanyima, Executive Director, Oxfam International Acknowledgments xv
Notes on Contributing Authors xvii
Introduction: Fiscal Policy as Human Rights Policy 1
Philip Alston and Nikki Reisch (editors)
PART 1
THE RELEVANCE OF HUMAN RIGHTS TO TAX LAW, POLICY, AND PRACTICE
1. Taxation and Human Rights: Mapping the Landscape 33
Nikki Reisch
2. Taxing for the Realization of Economic, Social, and Cultural Rights 59
Olivier De Schutter
3. Taxation as a Human Rights Issue: Gender and Substantive Equality 81
Sandra Fredman
4. Tax and Human Rights: The Moral Valence of Entitlements to Tax, Sovereignty, and Collectives 99
Mitchell A. Kane
5. The Search for Human Rights in Tax 115
Allison Christians
PART 2
TAX ABUSE IN GLOBAL PERSPECTIVE: CROSS- BORDER DIMENSIONS AND INTERNATIONAL RESPONSES
6. Procuring Profit Shifting: The State Role in Tax Avoidance 137
Alex Cobham
7. A Strange Alchemy: Embedding Human Rights in Tax Policy Spillover Assessments 161
Nicholas Lusiani and Mary Cosgrove
8. Tax Abuse and Implications for Human Rights in Africa 189
Annet Wanyana Oguttu and Monica Iyer
9. Some Aspects of the Architecture of International Tax Reform (and Their Human Rights–Related Consequences) 209
Michael Lennard
PART 3
THE RESPONSIBILITIES OF GOVERNMENTS: THE CASE OF TRANSPARENCY
10. Transparency, Tax, and Human Rights 237
Miranda Stewart
11. Taxation and Human Rights: A Delicate Balance 259
Reuven S. Avi-Yonah and Gianluca Mazzoni
12. Corporate Tax Privacy and Human Rights 279
Joshua D. Blank
13. How Countries Should Share Tax Information 303
Arthur J. Cockfield
14. United States’ Responsibility to Promote Financial Transparency 323
Tracy A. Kaye
PART 4
PRIVATE ACTORS AND THE PUBLIC PURSE: THE ROLES OF CORPORATIONS, LAWYERS, AND ACCOUNTANTS IN TAX ABUSE
15. Interrogating the Relationship between “Legally Defensible” Tax Planning and Social Justice 347
Daniel Shaviro
16. Who’s to Blame for the Money Drain? Corporate Power and Corruption as Competing Narratives for Lost Resources 367
Matti Ylönen
17. Creating a Human Rights Framework for Mapping and Addressing Corporate Tax Abuses 385
Matti Kohonen, Radhika Sarin, Troels Boerrild, and Ewan Livingston
18. ECHR Litigation as a Tool for Tax Justice in Europe 409
Céline Braumann
PART 5 TAXING EQUALITY: NATIONAL DEBATES
19. “Taxing for Growth” vs. “Taxing for Equality”—Using Human Rights to Combat Gender Inequalities, Poverty, and Income Inequalities in Fiscal Laws 429
Kathleen A. Lahey
20. Human Rights and the Taxation of Menstrual Hygiene Products in an Unequal World 449
Bridget J. Crawford and Carla Spivack
21. Recent Cases of Regressive and Racially Disparate Taxation in the United States 469
Andre L. Smith
22. Labor, Capital, and Human Rights 487
Beverly Moran
PART 6
BRINGING FISCAL POLICY AND SOCIAL RIGHTS TOGETHER
23. Inequality, Taxation, and Public Transfers in Latin America 515
Michael Hanni and Ricardo Martner
24. Basic Income as a Human Right? 541
Daniel J. Hemel
25. Taxation, Human Rights, and a Universal Basic Income 553
Philip Alston
Index 565
FOREWORD
Winnie Byanyima , Executive Director, Oxfam International *
Inequality, the global economy, and human rights—and the connections between them—lie at the center of one of the most important political debates of our time. And that debate is increasingly focused on the issue of taxation.
When people hear about tax avoidance and evasion they do not necessarily think of human rights abuses. To most people, the term “human rights abuses” evokes wrongful imprisonment, torture, freedom of speech being curtailed. It is time we widened the definition. The wealthy corporations and individuals sidestepping their obligations to pay tax are human rights abusers. Every school that is not built, every medicine that is not bought for lack of government funds due to tax dodging represents an abuse of the rights of women, children, and men across the world.
As we have learned from many of the greatest social movements in history, it is only when the moral compass of society shifts that we secure lasting change. We need to make tax dodging a moral issue—an issue of human rights. We need to see tax dodging and those who facilitate it as morally wrong, and the language and laws of human rights can help us achieve this.
There is a growing movement of people, all over the world, who want to ensure every individual and every corporation pays their fair share of taxes, who fight inequality and support human rights for all. This movement includes community leaders, activists, academics, writers, lawyers, students, artists, poets, and economists. It has a rich history. It exists in every country, from the richest to the poorest. The contributors to this important volume are part of that movement.
* This foreword is adapted from the keynote address that Ms. Byanyima gave at a conference on Human Rights and Tax in an Unequal World, held at New York University School of Law in September 2016.
Oxfam has always had human rights at its heart, and because of that, tax justice has become a greater area of focus in recent years. We know that without tax justice it is impossible to achieve our vision of a just world without poverty.
The Sustainable Development Goals (SDGs), agreed by the governments of the world in New York in 2015, set out an ambitious agenda for ending extreme poverty and hunger, ensuring equal rights for women and for marginalized communities, and much more. Delivering on these goals will cost trillions of dollars.
We know that aid will remain important for many countries for a long time to come— especially for fragile and conflict-affected states. But aid alone will not suffice. We will only achieve the SDGs if governments in poorer countries are able to mobilize their own resources, and then be held to account by their own citizens to spend those resources in a way that benefits everyone. The SDGs are achievable. The world has enough resources. The problem is that these resources are shared so unevenly: 1 percent of the people on the planet own the same amount of wealth as the other 99 percent combined. Oxfam’s analysis in January 2019 showed that just twenty-six billionaires own as much same wealth as the poorest half of humanity—that’s 3.8 billion people.
Faced with such extreme inequality, we must strive for tax justice, both for the revenues that can be generated and because of the urgent need to redistribute wealth—and power—from the haves to the have-nots. National tax systems must be judged on how effectively they generate revenue and how fairly they redistribute wealth, tackle inequalities, and enable people to claim their human rights. And the global tax system must be judged on whether it makes this possible.
Clement Attlee, the British Prime Minister who introduced the modern welfare state and the National Health Service in the United Kingdom, said: “Charity is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim.” Tax is the most dignified, reliable, and accountable way of ensuring we can fund the fulfillment of human rights for all. It is tax that should pay for the things we can only deliver as a society together—be it education, health services, energy infrastructure, or roads. These are not matters of charity! They are rights, and the provision of them is a duty of government and society.
The rallying call that helped spark the US War of Independence, “No taxation without representation,” today seems to have been turned on its head: many of the world’s wealthiest people and biggest corporations pay little or no tax, while using their wealth to exert huge influence over political decision-making, creating rules and systems that work in their favor at the expense of everybody else.
This capture and distortion of our tax system by wealthy elites is a direct attack on the principle of accountable, democratic government. The most fundamental duty of a government is to ensure the protection and fulfillment of its citizens’ human rights. Through doing so, governments earn the legitimacy to raise taxes. This is the social contract upon which strong societies that respect human rights must be built. But this social contract is in danger of falling apart, unless we boldly reform how tax works at a global level and, for most countries, at a national level, too.
When governments bow to pressure from powerful corporate interests, and create regressive fiscal systems that work for the few at the expense of the many, they are fueling political, social, and economic inequalities, and they are failing in their moral and legal responsibility to protect their citizens’ human rights.
Even more worryingly, governments across the world are not just favoring the interests of corporations and wealthy elites, but actively suppressing the voices of civil society actors who want to hold their governments and the private sector to account. Recently, CIVICUS World
Alliance for Citizen Participation identified serious threats to civil society in over one hundred countries—a figure that is on the rise in recent years. All human rights actors should be concerned by this.
The global tax system does not need just minor tweaks. It needs a courageous and transformational overhaul. The forces that have been allowed to shape it until now must be challenged as we seek to create a better, fairer tax system.
Firstly, we must remind ourselves that the global tax system is a symptom and a cause of a global economy that is working for a wealthy, powerful elite, at the expense of the many. In the past few decades, we have seen income and wealth inequality spiral out of control as some top corporate executives take home ever more obscene pay packets, while millions of workers are paid poverty wages. We have seen companies successfully lobby governments to reduce regulatory controls on labor rights, wages, and environmental standards. And we have seen a corporate culture develop which prioritizes shareholder returns over all else.
In the United Kingdom, for example, as the Chief Economist of the Bank of England has stated,1 the average large company was paying out 10 percent of its profits as shareholder dividends in 1970. Now, that figure has risen to 70 percent. That is money that could be used to increase innovation or productivity, or to improve wages for ordinary workers, helping ordinary people. Instead, it is going into the pockets of mostly rich investors.
At the same time, we have seen the use of tax havens skyrocket, to the extent that the Cayman Islands can receive some 24,000 times more investment per capita than Brazil does. We have seen levels of inward investments to the British Virgin Islands of more than 66,000 percent of their GDP. The architecture of tax havens has a pervasive role in causing regressive tax and spending systems in poor countries. The international tax system encourages harmful tax competition at every level—and it drives the race to the bottom in corporate taxation.
Many countries have slashed their corporate and high marginal tax rates. The United States has recently slashed its federal corporate tax rates from 35 percent to 21 percent. We are witnessing the same trend in Europe over a longer period—most countries have reduced their corporate income tax rates—as well as in emerging or developing countries. The global average rate for corporate income tax has been falling since the early 2000s from 30 percent to close to 24 percent.
And many governments, especially in poorer countries, are being blackmailed into giving companies ludicrously generous tax breaks and incentives. Dr. Donald Kaberuka, then President of the African Development Bank, reflecting on his time as finance minister of Rwanda, recounted what it felt like to be on the receiving end of tax negotiations: “The multinational comes to you and says we want to invest in your country, but we need a 5 year tax holiday and this long list of requirements. And by the way, we only have 6 hours, and then our plane is taking us to your neighbor, who will probably agree to all of our demands.”
When companies do not pay, governments are left with two basic choices: either they cut back on services—something that necessarily erodes the rights of the poorest most, hitting women and girls particularly hard—or they shift the burden onto more regressive taxes, such as value-added tax (VAT), which fall disproportionately on poor people. In sub-Saharan Africa, such indirect taxes make up on average 67 percent of tax revenues.2
There are two primary, interconnected causes of these alarming trends. Firstly, there is the rise of an economic consensus that took hold in the United States and the United Kingdom in the early 1980s and then rapidly spread across the world. Neoliberalism has long presented itself as the only credible economic orthodoxy in town. It is an ideology that promotes the individual
above society, that argues for lower taxes and fewer regulations, that downplays any real sense of corporate social responsibility, and that makes greed not just permissible, but praiseworthy.
There is growing recognition, however, that neoliberalism has been a false prophet. A 2016 report entitled “Neo-liberalism—Oversold?” showed how and why the ideology has failed.3 It showed that deregulating capital movement and slashing public spending has increased inequality, and harmed the level and sustainability of growth that countries could otherwise have achieved. This wasn’t an Oxfam report. This came from those famous radicals at the International Monetary Fund!
Second, there is, as I have touched upon, the capture of political and economic systems by wealthy elites. The fact that those with money can use it to exert influence over decision makers creates a vicious circle. More wealth leads to more power, which in turn allows the wealthy to rig the rules so they can accrue even more wealth, leaving everyone else far behind.
Tax rules are a powerful example of this. Grassroots activists and campaigners must contend with what feels like an army of accountants and lawyers, who are employed to help the world’s most powerful companies and individuals avoid paying their fair share. Imagine if we were employing thousands of people in Wall Street to travel around the United States and developing countries and actually physically destroy public buildings, schools, hospitals, or sack teachers and nurses. There would be an outcry—and people would say they are violating the human rights of those affected.
Yet that is what is effectively taking place every day in these tall glass towers full of diligent accountants, lawyers, and bankers. It is shameful. According to the Centre for Responsive Politics, the two issues that US policymakers are lobbied on most are the federal budget and appropriations, and taxes. Oxfam’s report, “Rigged Reform,” showed how the fifty biggest US companies—including global brands such Pfizer, Goldman Sachs, Walmart, and Apple—have stashed about $1.6 trillion dollars offshore.4 The same fifty companies spent $2.5 billion lobbying the US government between 2009 and 2015. An estimated $352 million was spent lobbying on tax issues—helping to secure over $423 billion in tax breaks. So for every $1 spent on lobbying, these fifty companies collectively received an estimated $1,200 in tax breaks. That is a scandalous rate of return.
If the causes of our broken tax system are not unique to tax, then our solutions will not be either. Power and accountability must be central to both our concept of tax justice and to the human rights framework. That focus demands we take a critical look at who is currently making the rules. The global tax system has insufficiently evolved over many decades. Some of the underlying principles remain stuck in the past, with rules that might have worked in the 1920s but which bear little relevance in the globalized economy that we have today. Fixing this anachronistic and tangled system will take coordinated, ambitious action from the world’s governments. We can take some encouragement from the fact that there have been more attempts in recent years to start to get to grips with this.
The G20 and the OECD did recognize that something had to be done about corporate tax avoidance in particular. The so-called Base Erosion and Profit Shifting (BEPS) process that they initiated has taken some welcome steps in the right direction, improving the sharing of information between tax authorities, for example. These steps do not go nearly far enough, however, particularly in addressing the needs of developing countries. That is hardly surprising as a majority of developing countries—representing two-thirds of the world’s governments—had no formal role in the negotiating process.
Many issues that are priorities for developing countries are still not addressed. For example, BEPS does not address the challenge of knowing whether the price of a good or service “traded” between different parts of the same global company is fair, or how to analyze and tackle harmful
tax incentives. Developing countries would also like to see a greater focus on preventing tax avoidance through more systemic actions, whether broader agreement on anti-abuse rules or on new ways to tax multinationals in the twenty-first century.
We want to see steps taken toward the creation of an inclusive, accountable multilateral tax body, in which all countries have an equal seat at the table—something that Oxfam and others have long been calling for. Based upon the existing legal responsibilities that all states have to achieve full human rights, this new body should also be empowered to sanction governments whose policies are harming the ability of other countries to raise the revenue that they need to fulfill the rights of their own populations. It should require all states to undertake assessments of the human rights implications of their tax policies, within their own borders and for other countries. The United Nations must have a central role to play in this process, facilitating inclusive intergovernmental negotiations, ensuring that the voices of rich countries aren’t allowed to dominate, and bringing in the private sector, civil society, and other multilateral institutions.
Even if progressive tax systems are agreed upon, ensuring that they actually work in practice represents a significant further challenge. That is where transparency comes in. Citizens— and governments—must be able to know how money is flowing within and across borders and where tax should be levied but is actually being avoided and evaded. A number of potential measures would be both powerful and pragmatic; technical but transformative. For example, multinational companies must be required to report publicly on their turnover, profits, and taxes in every country where they operate.
Similarly, we know that many rich individuals are using tax havens to hide their wealth or as bases from which to make investments, often through opaque layers of companies. The public has a right to know who really is behind these shell companies. The Panama Papers and the Paradise Papers had a powerful effect in raising global attention to this—and people around the world responded angrily. There is growing pressure for every country to establish public registries of beneficial ownership for all companies, trusts, and partnerships held there. It has been encouraging to see a wide range of countries commit to such public registries for companies within recent years, including the United Kingdom, France, Kenya, Nigeria, and Afghanistan. The European Union has made a similar commitment requiring public registers for companies. The United Kingdom will now require its overseas territories to publish public registers for companies.
Automatic exchange of information between revenue authorities will also help, though we must avoid insisting on full reciprocity if one country simply does not have the resources or capacity to provide as much information as another. Otherwise, we again risk disadvantaging poorer countries.
State capacity is critical. Governments and their revenue authorities, especially in poorer countries, have the odds stacked against them when they are up against the armies of tax lawyers and accountants employed by major tax dodgers. Sub-Saharan African countries would need to employ more than an estimated 650,000 additional tax officials for the region to have the same ratio of tax officials to population as the OECD average. So governments in poorer countries must invest in building up effective tax revenue authorities to collect the taxes that are due and to clamp down on abuses of the system. They must be supported in this endeavor, with sufficient resources and with the ability to impose meaningful sanctions on those who commit or facilitate tax dodging.
It has been in the interests of tax dodgers, and those who facilitate tax dodging, to make sure that tax laws are as complex and opaque as possible. It is essential that we find ways to demystify tax—to get people to see that their rights are at stake, and to show them that there is something they can do about it. Tax justice can only be achieved when citizens are able to make
their voices heard at all stages of the process and can hold their governments to account on both policymaking and implementation.
Human rights frameworks give us further opportunities to hold governments and corporations to account. For example, governments who are not doing all they can to generate resources for essential public services, and who are thus failing to meet the economic and social rights of their citizens, could be challenged in national courts or through international fora such as the Human Rights Council.
The same can apply to corporations too. Tax behavior should be assessed alongside companies’ other commitments to sustainable development under, for example, the UN Global Compact initiative, and should be seen as relevant to a company’s “corporate responsibility to respect human rights” outlined in the UN Guiding Principles for Business and Human Rights.
Well-designed tax systems that redistribute wealth and drive spending on public goods are one of the best weapons we have in the fight against inequality and poverty. Badly designed tax systems, on the other hand, exacerbate both. When judging efforts at a national level, therefore, we must ask whether or not tax reforms will serve to reduce inequalities while raising enough money to fulfill the rights and needs of their citizens. We must look at whether countries are setting progressive marginal tax rates, at whether they are relying more on direct or indirect taxes, at whether they are implementing wealth and inheritance taxes, at their corporate tax rate and the effective incidence of this.
And when assessing efforts to reform tax at a global level, we must ask ourselves whether or not the reforms are making it easier for national governments to implement these kinds of progressive, effective tax systems within their own countries, or will they still find themselves at the mercy of the big multinationals and the global super-rich?
Creating a fairer tax system continues to be an uphill battle. But there are reasons for optimism. After multiple high-profile tax scandals, and as ordinary citizens around the world are feeling the impact of an economic system that is rigged against them, governments are under pressure to act and have taken some steps in the right direction. Lasting change will occur, I believe, when we make tax dodging and those who facilitate it morally unacceptable. Let us expose more than ever how tackling tax dodging is fundamental to realizing and respecting the human rights of people all over the world, and vital to ending the injustice of poverty.
NOTES
1. D. Weldon, ‘Shareholder power “holding back economic growth” ’, BBC News, 24 July 2015, available online at https://www.bbc.com/news/business-33660426
2. IMF, Fiscal Policy and Income Inequality, IMF Policy Paper (2014), at Figure 8, available online at https://www.imf.org/external/np/pp/eng/2014/012314.pdf
3. J. D. Ostry, P. Loungani, and D. Furceri, IMF, ‘Neoliberalism: Oversold?’, Finance & Development (2016), available online at https://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf.
4. Oxfam, Rigged Reform (2017), available online at https://www.oxfamamerica.org/static/media/ files/Rigged_Reform_FINAL.pdf.
ACKNOWLEDGMENTS
The co-editors are very grateful to the many people who contributed to planning, running, and participating in the conference that generated the chapters in this volume. The conference was organized by the Center for Human Rights and Global Justice at New York University School of Law, and particular thanks are due to Lauren Flanagan, Pamela Mercado, Nealofar Panjshiri, Deborah Popowski, Silvia de Rosa, and Anam Salem.
We received very helpful advice in relation to topics and speakers from our colleagues in the NYU School of Law Tax Program, and especially from Daniel Shaviro and Mitchell Kane. Allison Christians and Krishen Mehta also provided important insights.
The conference was followed by a workshop on legal accountability for tax injustice, which involved a range of advocates, practitioners, and scholars from around the world. We are grateful to the Open Society Foundations, and their Public Health Program, Fiscal Governance Program, and the Open Society Justice Initiative, for financial and logistical support for the workshop, as well as their participation in its conceptualization. Thanks are due to Betsy Apple, Ben Batros, Reema Hijazi, Rosalind McKenna, and Vera Mshana.
Other groups working on issues relating to taxation and human rights also provided valuable advice and assistance in the context of both the conference and the workshop. In particular, we are grateful to the staff of the Center for Economic and Social Rights, especially Niko Lusiani, and to the staff of Tax Justice Network, especially Alex Cobham and Liz Nelson.
We are also grateful to Jessye Freeman for assistance in editing the manuscript, and to Blake Ratcliff and his colleagues at Oxford University Press.
NOTES ON CONTRIBUTING AUTHORS
Philip Alston is John Norton Pomeroy Professor of Law at New York University School of Law and is also currently UN Special Rapporteur on extreme poverty and human rights.
Reuven S. Avi-Yonah is the Irwin I. Cohn Professor of Law and director of the International Tax LLM Program at the University of Michigan Law School. He specializes in corporate and international taxation. He has served as a consultant to the US Department of the Treasury and the Organisation for Economic Co-operation and Development (OECD) on tax competition, and is a member of the steering group for OECD’s International Network for Tax Research.
Joshua D. Blank is Professor of Law at the University of California, Irvine School of Law. He previously taught at New York University School of Law, where he was Professor of Tax Law, Vice Dean for Technology-Enhanced Education, and Faculty Director of the Graduate Tax Program. His scholarship focuses on tax administration and compliance, taxpayer privacy and tax transparency, and taxation of business entities.
Troels Boerrild is Head of Responsible Investments at Danish Pension fund, MP Pension. At the time of writing he was Senior Policy and Advocacy Adviser at ActionAid Denmark.
Céline Braumann is a Lecturer and Researcher in the Department of European, International, and Comparative Law at the University of Vienna. She holds an LLM from New York University School of Law, and her research focuses on international economic law and the effects of and remedies for economic and social inequality and injustice.
Winnie Byanyima is Executive Director of Oxfam International. She is a global women’s rights leader, human rights defender and a global authority on economic inequality. She served eleven years in the Ugandan Parliament, and has served at the African Union Commission and as Director of Gender and Development at the UN Development Program.
Allison Christians is the H. Heward Stikeman Chair in the Law of Taxationat McGill University Faculty of Law, where she teaches and writes on national, comparative, and international tax law and policy.
Alex Cobham is chief executive of the Tax Justice Network, and a founding member of the steering group of the Independent Commission for the Reform of International Corporate
Taxation (ICRICT). Previously he was a research fellow at the Center for Global Development, and before that held posts at Christian Aid, Save the Children, and Oxford University (St Anne’s College and Queen Elizabeth House).
Arthur J. Cockfield is a Professor at Queen’s University Faculty of Law, where he was appointed as a Queen’s National Scholar. He is a senior research fellow at Monash University, and has been a Fulbright Visiting Chair in Policy Studies at the University of Texas at Austin. His research mainly focuses on tax law.
Mary Cosgrove is a lecturer on tax and accountancy at the J.E. Cairnes School of Business and Economics, National University of Ireland, Galway, and a doctoral candidate at the Irish Centre for Human Rights. She previously worked as a tax adviser for over fifteen years, including in a “Big Four” accountancy firm and a multinational enterprise.
Bridget J. Crawford is a Professor at the Elisabeth Haub School of Law at Pace University School of Law. She is a member of the American Law Institute and the American College of Trust and Estate Counsel, and her most recent book is Feminist Judgments: Rewritten Tax Opinions (with Anthony C. Infanti).
Olivier De Schutter is a professor at the University of Louvain (Belgium) and at SciencesPo (France). From 2008 to 2014 he was the UN Special Rapporteur on the right to food, and since 2015, has been a member of the UN Committee on Economic, Social and Cultural Rights.
Sandra Fredman is Professor of Law at the University of Oxford, a Fellow of the British Academy, and a Queen’s Council (honoris causa). She has published widely in the fields of equality, labor law, and human rights. In 2012, she founded the Oxford Human Rights Hub, of which she is the director.
Michael Hanni is an Economic Affairs Officer in the Economic Development Division of the UN Economic Commission for Latin America and the Caribbean (ECLAC).
Daniel J. Hemel is an assistant professor at the University of Chicago Law School, where he teaches tax, administrative law, and torts. He previously clerked for Judge Michael Boudin on the US Court of Appeals for the First Circuit, Judge Sri Srinivasan on the US Court of Appeals for the District of Columbia Circuit, and Associate Justice Elena Kagan on the US Supreme Court.
Monica Iyer is a human rights attorney and consultant based in Milan, Italy. She has worked on human and civil rights issues for a number of nongovernmental, state, and international organizations, including the UN Office of the High Commissioner for Human Rights and the New York State Office of the Attorney General.
Mitchell A. Kane is the Gerald L. Wallace Professor of Taxation at New York University School of Law. He clerked for the Honorable Karen LeCraft Henderson of the US Court of Appeals for the DC Circuit and practiced law with the firm of Covington & Burling before joining the faculty at the University of Virginia School of Law.
Tracy A. Kaye is a Professor of Law and Eric Byrne Research Fellow at Seton Hall Law School. She specializes in US federal income tax law and international, European Union, and comparative tax law. She has been the Fulbright Senior Research Scholar at the University of Luxembourg, PwC Visiting Professor at the Vienna University of Economics and Business, and Research Scholar at the Max Planck Institute for Intellectual Property, Competition, and Tax Law. Prior to beginning her academic career at Seton Hall Law School, Kaye earned a B.S. in Accountancy, magna cum laude, at the University of Illinois; an M.S. in Taxation at DePaul University; and her J.D., cum laude, at the Georgetown University Law Center.
Matti Kohonen is Principal Adviser on the Private Sector, at Christian Aid. He worked for over ten years on the impact of financial and tax policies on developing countries and populations, and is a founding member of the Tax Justice Network and co-editor of a volume entitled Tax Justice: Putting Global Inequality on the Agenda.
Kathleen A. Lahey is Professor and Queen’s National Scholar, Faculty of Law, Queen’s University, Canada, and specializes in tax law, fiscal policy, and human rights. She was a Visiting Professor in Fiscal Policy at Umeå University, Sweden, Visiting Scholar at the International Tax Program, Harvard Law School, and has multijurisdictional expertise in tax, economic laws, and fiscal policies.
Michael Lennard is Chief of International Tax Cooperation in the Financing for Development Office of the United Nations. He previously held posts at the Organisation for Economic Co-operation and Development (OECD), the Australian Tax Office, and the Australian Government’s Office of International Law, where he worked on tax, trade, investment, and human rights issues.
Ewan Livingston is Head of Corporate Partnerships at ActionAid UK, an international charity that works with women and girls living in poverty. He leads ActionAid’s engagement with the private sector on issues including tax and human rights.
Nicholas Lusiani is Senior Advisor at Oxfam, focused on tax and inequality. At the time of writing the article in this volume, he directed the Human Rights in Economic Policy Program at the Center for Economic and Social Rights. He previously worked in the fields of business and human rights, external debt, humanitarian relief, indigenous rights in the extractive industry, and criminal justice.
Ricardo Martner is Chief of the Fiscal Affairs Unit in the Economic Development Division of the UN Economic Commission for Latin America and the Caribbean (ECLAC), and has worked with ECLAC since 1986. He has written widely in the field of public finance.
Gianluca Mazzoni is an SJD candidate at the University of Michigan Law School, where he also completed his LLM degree in International Tax in 2016. He was previously a trainee tax lawyer in a leading Italian tax law firm. His research is focused on the interaction between the right to privacy and data protection and tax law.
Beverly Moran is Professor of Law and Professor of Sociology at Vanderbilt University Law School, where she has taught since 2001. In addition to her work on the Internal Revenue Code, her interdisciplinary and multidisciplinary work encompasses empirical legal studies, international and comparative tax law, Islamic law, labor law, law and development, legal education, legal philosophy, and politics.
Annet Wanyana Oguttu is a professor of tax law at the University of Pretoria. She has published extensively on international tax law and is a rated researcher under South Africa’s National Research Foundation. In 2014, the President of South Africa appointed her as a Commissioner of the South African Law Reform Commission, and in 2013, she became a member of the Davis Tax Committee to assess South Africa’s tax policy framework.
Nikki Reisch is the Legal Director of the Center for Human Rights and Global Justice and a supervising attorney in the Global Justice Clinic at New York University School of Law. She previously worked as an advocate challenging adverse impacts of international financial and development institutions on communities in the Global South, and clerked for the Second and Ninth Circuit Courts of Appeals.
Radhika Sarin is a private sector policy adviser at Oxfam. She has over a decade of experience in research, advocacy, and campaigning on environmental, social justice, and governance issues, with a focus on countries rich in natural resources, served for four years on the global Board of the Extractive Industries Transparency Initiative, and was international coordinator of the Publish What You Pay civil society coalition.
Daniel Shaviro is the Wayne Perry Professor of Taxation at New York University School of Law. He previously worked at Caplin & Drysdale, a leading tax specialty firm, and at the Joint Congressional Committee on Taxation, and taught at the University of Chicago Law School. His scholarly work examines tax policy, budget policy, and entitlements issues.
Andre L. Smith is currently a visiting associate professor at the Howard University School of Law. He is the author of numerous law review articles and book chapters on tax law, administrative law, and critical race tax theory, including Black Tax: Tax Law and Racial Economic Justice exploring the links between tax and racial subordination.
Carla Spivack is the Oxford Research Professor of Law and Director of the Certificate in Estate Planning, at Oklahoma City University School of Law. She has written several articles about the intersection of inheritance law with gender, race, and class, and is currently working on a book called How American Property Law (Still) Cheats Women and What to Do About It.
Miranda Stewart is Professor at the University of Melbourne Law School where she is director of taxation studies and the tax group. Miranda is also a fellow the Tax and Transfer Policy Institute, Crawford School of Public Policy at the Australian National University, where she was the inaugural director from 2014-2018. Miranda has more than twenty-five years’ tax experience in academia, government, and the private sector and researches across a wide range of tax law and policy topics including tax and globalization, taxation of businesses, not-for-profits, gender equality, budgeting and tax reform.
Matti Ylönen has a PhD in World Politics and is a post-doctoral researcher in University of Helsinki. He has published extensively on tax havens, global governance, policy consultancies, development policy, and corporate power. In 2015, his article on the politics of intra-firm trade was awarded the Amartya Sen Prize at Yale University. Ylönen is currently on finalizing a book project that focuses on the intellectual history of corporate power.
INTRODUCTION
Fiscal Policy as Human Rights Policy
PHILIP ALSTON AND NIKKI REISCH
I. INTRODUCTION
Just over a century ago, in 1917, the Austrian sociologist Rudolf Goldscheid described the national budget as “the skeleton of the state stripped of all misleading ideologies” and coined the term “fiscal sociology” to describe the importance of adopting a multidisciplinary approach to the study of taxation and public finance.1 One year later, Joseph Schumpeter famously used the same term and expressed a similar idea in observing that “[t]he spirit of a people, its cultural level, its social structure, the deeds its policy may prepare” are all “written in its fiscal history, stripped of all phrases.”2 Far from restricting this claim to any given society, he went further to argue that understanding fiscal policy is central to being able to discern “the thunder of world history.”3 In other words, fiscal policy4 is not just a dry and dull set of statistics but rather holds the key to understanding the deepest values of a society, and potentially even the interactions among societies. Both Goldscheid and Schumpeter also sought to contrast what they considered to be the bare and incontestable facts reflected in the budget with the “misleading ideologies” and empty “phrases” used by politicians, bureaucrats, and others to describe or perhaps misrepresent the policies they were purporting to promote.
In his lecture, which addressed the crisis of what he termed “the tax state” in the aftermath of World War I and the focus on reparations payable to the victors, Schumpeter identified public finances as “one of the best starting points for an investigation of society, especially . . . its political life.”5 He distinguished between the “causal” and the “symptomatic” importance of fiscal policy,6 which could either be the direct cause of change in society, or it could merely reflect changes that were brought about by other means.
The principal inquiry animating the present volume seeks to understand why, a century after these insights started to shape the work of scholars in many fields, the suggestion that fiscal policy, including taxation, might be determinative or reflective of key aspects of human rights policy is often met with puzzlement. The conventional wisdom, shared by most policymakers, professionals, and government officials in both fields, is that human rights and taxation have
little to do with one another. They would, of course, acknowledge that there are indirect impacts and connections, but just as tax might be linked to domestic violence or migration policies or many other challenging issues, these limited interactions do not warrant an effort to try to bring the two fields into sustained conversation with one another. Various tax experts to whom we reached out in preparing the conference on which this book is based were skeptical of the proposition that tax policies and systems have significant implications for human rights policy and practice, let alone that human rights law has relevance for tax law. In part this may be because the field of “human rights” is considered by many unfamiliar with it to be synonymous with civil and political rights. Because tax laws are generally assumed not to overtly discriminate on the grounds of race, gender, sexual orientation, disability, or other impermissible classifications, the social policy consequences of tax policy are not the concern of tax specialists. Similarly, the intense bargaining and negotiation that goes into the making of tax policies is often seen as the epitome of democratic decision-making in practice, rather than as a process that might, by its opacity and propensity to be hijacked by special interests, pose a threat to the assumptions underlying the democratic state. It is thus not surprising that even a recent volume dedicated to promoting interdisciplinary approaches to tax, with the stated aim of covering “the aspects of legality, morality, and psychology of tax avoidance, and the challenges of measurement of economic effect of various tax avoidance activities,” nevertheless contains no substantive discussion of human rights.7
The puzzlement is generally every bit as strong on the human rights side of the ledger. Most major human rights groups avoid engaging in issues that they characterize as involving redistribution, let alone becoming involved in debates over fiscal policy.8 While a handful of scholars and several influential advocacy groups have focused on the intersections between human rights and fiscal policy,9 most human rights advocates shy away from issues that they see as technical and opaque, that require expertise which they may not have or could not readily acquire, and that are not susceptible to the analytical techniques routinely used in relation to traditional human rights concerns to identify clear-cut violations, to name those responsible, and to prescribe the solution. Even Samuel Moyn, whose book Not Enough is relentlessly critical of the human rights movement for not having addressed issues of inequality in a meaningful way, undertakes no analysis at all of the relevance of tax policy in any such endeavor.10
None of this is to single out human rights and tax specialists as being exceptionally rigid or narrowly focused. Indeed, in historical terms, their lack of direct engagement is consistent with the observation that “[f]or much of the twentieth century, most historians, sociologists, legal scholars, and political scientists did not ask questions about the social or institutional roots or consequences of taxation” because public finance was a matter for economists, who in turn did not concern themselves with the broader social implications of taxation.11 It may still be argued, however, that human rights scholars and practitioners have been a little slower than other disciplines in recent times to acknowledge the critically important linkages between the two fields.
In philosophy, for example, Liam Murphy and Thomas Nagel observed in 2002 that the theoretical debates on social and economic justice, provoked in part by John Rawls’s book A Theory of Justice, had led to remarkably little engagement with tax policy, despite its centrality to most conceptions of justice.12 But their analysis had a major impact and philosophers have subsequently become very actively involved in discussions around taxation and fiscal justice.13 This does not mean, however, that the term human rights—let alone the body of rights specifically recognized in international law—has been a principal focus of attention. Thus, a recent volume in which a dozen different contributors reflect on the philosophical foundations of tax law,
and which acknowledges the strong influence of Murphy and Nagel’s The Myth of Ownership, contains many references to morality, justice, equality, and so on, but not a single reference to human rights or the attendant obligations assumed by all governments.14
Beyond the confines of philosophy, a range of other disciplines, including law, now engage systematically with the social and other implications of fiscal policy, leading some scholars to claim that this “new wave of multidisciplinary scholarship on taxation” signifies the emergence of a field which they call “the new fiscal sociology.”15 This nascent field synthesizes and transcends the three major streams of interdisciplinary work on tax that these authors identify as having dominated the period since World War II. These are: (1) modernization theory, which focused on the interactions between levels of development and fiscal policy; (2) elite theory, which sought to explain why people consent to pay taxes, despite the assumption of an underlying conflict of interest between rulers and the subjects they sought to tax; and (3) militarist theory, which viewed bellicosity as a prime motivation for developing more effective systems of tax collection. In both challenging and drawing upon each of these three approaches, the new fiscal sociology adopts a crosscutting approach that “points towards a new theory of taxation as a social contract.”16 While some of the writing in this burgeoning field, as well as the more longstanding critical tax literature,17 addresses classic human rights issues such as racial inequality and gender discrimination,18 for the most part the normative content and framework of international human rights law are rarely discussed.
It is of course not enough to merely point out either that the majority of human rights scholars and practitioners have been late in coming to the fiscal policy debate, or that most of those who are now engaged in multidisciplinary approaches to the consequences of fiscal policy pay scant, if any, regard to human rights norms. The burden of this book is to make the affirmative case as to why there are important synergies to be had if the fields of human rights and tax are brought into sustained conversation with one another.
This introduction seeks to respond to that challenge. Section II illustrates some of the linkages between tax and human rights. Section III outlines the content of the rich and diverse contributions made by the authors of the chapters that follow. Section IV argues that those who are concerned with growing income and wealth inequality, rapidly increasing economic insecurity among the middle class, the persistence of unconscionable levels of extreme poverty, and the rise of populist and illiberal regimes need to devote more attention to the fact that the dominant orthodox economic policies accord priority to the goal of fiscal consolidation, which has a range of extremely negative consequences. Finally, section V concludes by identifying some of the ways in which human rights norms should be brought to bear in future debates over fiscal policy.
II. I ll Us TR aTIN g TH e l INK ages
Taxation affects which resources stay in private versus public hands, which activities are encouraged or discouraged, how much is available to the state, and who pays for and receives the public goods and services the state provides. Human rights, in turn, inform not only how tax policy should be made, but what policies are permissible, when, and why, setting parameters for the revenue-raising objectives and distributive effects of taxation, as well as the processes by which tax laws are adopted and implemented. In short, tax affects the realization of human rights in all countries, developed and developing alike, through its role in resource mobilization, redistribution, regulation, and representation.19
Resource mobilization: All rights cost money and require public policies to support them.20 Taxes generate most of the revenue that states can use to protect and promote the rights of their populations. Because they largely determine the overall “size of the pie,” fiscal policies are an indispensable part of the equation for determining, in accordance with the relevant international legal obligations, whether states have taken steps to the “maximum of available resources” to realize human rights.21
Redistribution: State budgets are fundamentally about redistribution of resources. Whether those policies are progressive or regressive depends on the nature of the government’s tax policies along with its spending priorities. These in turn affect the types and degrees of inequality within the society. It is in large part because tax policy transfers resources from one part of society to another that it is both unpopular and contested. But it is also opaque. It is true that taxes imposed on the richest 20 percent in most countries will end up paying for the vast majority of social protection services.22 Less frequently acknowledged but equally true, however, is the fact that, in many countries, the net transfers from the government budget to the wealthy will be far higher than any of the comparable amounts paid out in welfare or other public services to the poor. An analysis of winners and losers of US tax policy reached the following conclusion:
Most tax expenditures redistribute from the rich and the upper-middle class to the middle and upper-middle classes. They help close the gap between the haves and the have-lots rather than between the have-nots and the have-lots. Normally we expect social programs to fight inequality and poverty. Tax expenditures address inequality in the upper half of the income distribution and generally do little to reduce poverty.23
Australian tax policies illustrate the same point. A 2018 report showed that the bottom 20 percent of Australians in terms of wealth received A$6.1 billion in tax concessions and exemptions, while the top 20 percent received over ten times that amount (A$68 billion).24 And in Ghana, a 2017 study showed that very little fiscal redistribution takes place through the budget, and that were it not for in-kind benefits to the poor from health and education spending, the overall effect of government spending and taxation would actually increase poverty in Ghana.25
Tax policies also affect the distribution of resources among states. The differential tax treatment of domestic and foreign entities in a given country, and variations in tax law between jurisdictions, influence the global flow and distribution of assets.
Regulation: Tax policies incentivize or disincentivize a vast array of economic, social, cultural, political, religious, artistic, and other types of conduct. The list of tax-influenced decisions in any society is potentially infinite, including where children go to school, which media people watch or read, who gives money and for what causes, what forms of medical care will be accessible, and what environmentally friendly policies will be promoted. The issue of gender discrimination in taxation is a particularly good example in this regard. Taxes “affect patterns of marriage, childbearing, work, savings, education, charity, home ownership, and more.”26 While it is relatively uncommon today for tax laws to explicitly establish different rates or benefits for men and women, less overt forms of gender discrimination persist. For example, there is growing outrage over “pink taxes,” involving higher prices charged for goods marketed to women and lower prices for comparable products marketed to men or sold as gender-neutral.27 In addition, women are overrepresented among the poor and bear the brunt of cuts to public spending, whether through the direct loss of services on which they depend or the increase in unpaid care work they provide to make up for insufficient social support.28
Representation: The nature of the relationship between the government and the governed is reflected in and influenced by fiscal policy. In terms of design and implementation, taxes can
either reinforce or undermine the state’s accountability to the public and the robustness of democratic institutions.
One of the most important dimensions of the relationship between human rights and tax policies in the current era is the increasingly global nature of many of the challenges and thus of the needed solutions. More and more, both tax law and human rights law are called upon to address cross-border and multijurisdictional phenomena, such as the extraterritorial human rights impacts of state conduct and the global operations of companies, the tax consequences of which are not confined to a single territory. The sovereign territorial state is increasingly rivaled by the footloose transnational corporation, complicating efforts both to control corporate conduct (the human rights advocate’s problem) and to capture corporate profit (the tax collector’s problem). But the legal and regulatory frameworks for managing these impacts often remain rooted in one or other national jurisdiction. The growth of the global economy and the dominance of transnational enterprises today have eroded traditional notions of state sovereignty, enhancing the power and role of nonstate actors domestically and internationally. The displacement of the state as the central actor calls into question the continued relevance of international tax and human rights law and institutions insofar as they are designed around and rooted in the sovereign state. The shift poses a host of questions about how to effectively regulate conduct, implement, and enforce principles and norms in a world in which neither cause nor effect respects national borders.
Tax avoidance and evasion are by no means new phenomena. But the pervasiveness of the practices and the scale of the resultant revenue losses have garnered worldwide attention in the past several years, following unprecedented disclosures and sophisticated investigative reporting into the world of cross-border profit-shifting and offshore accounts. The leaking of the Paradise Papers in November 2017 is just the latest in a long and growing list of revelations about the widespread, systemic nature of officially sanctioned tax avoidance and evasion schemes that benefit corporations and rich individuals.29 That list includes the 2014 LuxLeaks disclosures and the 2016 Panama Papers release, among others.30
Multinational corporations are especially well placed to exploit the climate of competition rather than cooperation between countries around tax matters by shifting their private profits between jurisdictions. Leaked information regarding multinational corporate tax deals has exposed how Ireland,31 the Netherlands,32 and Luxembourg33 have facilitated tax avoidance by some of the world’s largest companies, including Apple, Starbucks, Disney, IKEA, and Fiat. Similarly, a study released by the Australian tax office in December 2017 found that more than a third of “the largest public companies and multinational entities in Australia paid no tax in the most recent financial year on record.”34 Although facilitated by certain states’ policies on financial secrecy and corporate reporting, corporations would not be able to minimize their tax burdens without the active involvement of various private actors, including lawyers and accountants.
The consequences of corporate tax dodging are by no means limited to financial secrecy states; losses affect both the host and home countries of the corporations involved. When wealthy entities avoid paying their fair share of taxes, the public suffers in multiple ways—and some populations disproportionately so. Nowhere does tax dodging take a larger toll than in developing countries, which depend more heavily than industrialized countries on corporate income tax as a source of public revenue and have far less cushion in their budgets to start.35 Tax abuse, defined broadly as “practices contrary to the letter or spirit of global or national tax laws and policies,”36 threatens rights, particularly in the Global South, for at least two reasons. First, because of overall resource scarcity, the consequences of lost revenues for the state’s ability to combat poverty and fulfill its human rights obligations may be starker in many of the world’s
poorest countries than elsewhere. Second, many developing countries lack a broad tax base and suffer from weak tax administration, such that taxes paid by the corporate sector are among the few sources of public revenue.37 The close interrelationship between tax havens in the North and tax avoidance in the South presents a potential opportunity to introduce the language of human rights into debates about fiscal policies in developed countries and to underscore the human rights obligations of those states not only to their own populations but also to persons abroad. It remains difficult, however, to connect the dots.
Although muted and far slower than many activists would like, official reactions to the tax scandals have been gathering steam. The European Commission has been at the forefront of attempts to curb tax abuse and the inter-state tax competition that fuels the practice, as exemplified by its pursuit of Ireland for providing a de facto tax haven to corporations like Apple. In December 2017, on the heels of the Paradise Papers exposé and following the conclusion of an EU inquiry into tax avoidance and evasion, the European Parliament adopted a recommendation calling on member states to implement public country-by-country reporting on corporate profits, subsidies, and taxes.38 Transparency measures like this, long advocated by civil society organizations such as the Tax Justice Network, represent one way in which states can take back the reins and begin fulfilling their human rights obligations both to protect against third-party conduct that undermines human rights and to mobilize maximum available resources to realize human rights.
Other intergovernmental organizations have likewise increased their attention to global tax policies and problems, with discussions of taxation dominating G20 and Organisation for Economic Co-operation and Development (OECD) meetings in recent years,39 as well as demands within the United Nations for the creation of a new international tax commission.40
III. CONTRIBUTION s TO THI s VO l U me
The chapters in this volume demonstrate that there are many entry points into the broader debate about the relationship between human rights and taxation. The first part of the volume introduces fundamental points of intersection between the fields of tax and human rights, with scholars from both arenas discussing the promise and the limits of bringing the disciplines into dialogue with one another. This part includes an opening chapter that maps the evolving landscape of the tax and human rights debate, including its antecedents in discussions regarding public budgeting, critical tax theory, and development. The second set of chapters examines tax policy and problems in global perspective, focusing on the cross-border nature and human rights impacts of tax abuses and evaluating potential solutions. Part III looks at the role of states in facilitating or preventing harmful tax policies and practices, specifically through transparency regulations. The fourth part of the book includes chapters that look critically and creatively at the roles and responsibilities of private actors in shaping tax policy and practice, and prospects for holding tax wrongdoers accountable. Part IV brings together essays that examine various domestic tax laws and policies in light of the foundational human rights concepts of equality and nondiscrimination. The final part identifies synergies between the tax and human rights agendas around efforts to tackle economic, social, and political inequalities. It includes a chapter that highlights the redistributive potential of revenue-raising tools, and two chapters contrasting approaches to the feasibility and desirability of a universal basic income. The aim of this collection is to lay a foundation for a new, critical human rights discourse on tax policies and practices in an age of growing inequality. The contributions to this volume are
not as geographically representative as the editors would have liked. The focus is primarily on tax policies and practices in the global North. This is in part because of the outsize influence exerted by US tax laws on those of many other countries, whether through a demonstration effect, influence on policy assumptions, or tax competition. Nonetheless, there is a need for future conversations on tax and human rights to better address diverse realities, and to bring in diverse voices, from across the globe.
In Part I the opening chapters grapple with the task of conceptualizing the relationship between tax and human rights, and identifying the fundamental changes required to bring the two fields into alignment. From the human rights perspective, there is a need for advocates to address the economic and fiscal challenges and trade-offs involved in implementing human rights obligations, rather than sticking to the familiar terrain of defining normative principles. This shift requires them to take account of issues of economic and social justice accompanied by a fairer societal distribution of resources.
With an eye toward the challenges of tackling implementation, Olivier De Schutter’s chapter focuses on the application of human rights law to state tax policy, identifying normative principles by which UN human rights treaty supervisory bodies, like the Committee on Economic, Social and Cultural Rights, can assess whether a state’s tax laws and practices comply with its human rights obligations. He identifies four key objectives toward which state tax policies must strive: widening the tax base, ensuring progressivity, plugging holes in the tax system, and strengthening participation and accountability around tax policy. De Schutter emphasizes that the progressivity of a state’s fiscal policy depends on not only how tax revenues are raised but also how they are spent. He provides an overview of recent literature on the impacts of tax policy on investment decisions, and traces recent international efforts to curb illicit financial flows. Stemming the loss of state revenue to cross-border tax abuses, De Schutter argues, will require action on at least three fronts: to strengthen the capacity of domestic tax administrations, to increase recognition of states’ extraterritorial human rights obligations, and to enhance the due diligence undertaken by corporations and financial institutions to minimize tax avoidance.
Sandra Fredman proposes a four-dimensional conception of substantive equality to evaluate the gendered impacts of taxation policies from a human rights perspective. She explores how patterns of persistent gender roles in work and migration interact with tax policy to produce asymmetrical fiscal outcomes, entrench gender stereotypes, and reinforce maledominated institutions and structures in ways that violate the human right to equality. In particular, she examines the increased reliance on consumption taxes, such as the value-added tax (VAT), and continued joint filing requirements for married couples’ personal income tax in many countries.
From the perspective of tax scholars, addressing the patently unsatisfactory situation in the international tax regime requires a fundamental rethinking of the premises on which global taxing powers are allocated. Several chapters in this volume reconceptualize fairness in international taxation in light of human rights principles, scrutinizing the foundations for and distribution of the rights to tax, as well as the structure and objectives of international tax policies and institutions.
Mitchell Kane questions the rightful claims of developed and developing countries to portions of the “international tax base.” He identifies a common starting point for tax and human rights experts intent on reform: the inadequacy of tax revenues. Although Kane is skeptical about what human rights discourse can add to existing tax reform incentives, he explores several possible normative angles. He offers a radical rethink of the allocation of taxing rights across countries, recasting the traditional source-residence dichotomy in favor of a system for
allocating gains from trade between nations, and examining the duties states hold vis-à-vis one another to explore whether these alternative approaches could achieve more just outcomes. He suggests that surplus gains from trade between states, which cannot be said to belong to either state, could be allocated globally to those most in need. Kane further posits that there may be human rights justifications for requiring states with greater income and capacity in their tax administrations to undertake against-interest downward adjustments to profits booked in a country other than where they were generated.
Allison Christians explores the prospects for bringing legal claims seeking accountability for human rights harms due to tax policies and practices, based on the relationship between an individual and her own state, between an individual and a foreign state, or between two or more states. She traces the shortcomings of past attempts to challenge states’ failure to raise sufficient tax revenue and corporations’ failure to pay sufficient taxes, as well as efforts to define minimum standards of conduct that states owe one another. Although she views tax law as a viable target of human rights advocacy and legal action, she expresses skepticism about the capacity of the law to disentangle the multiplicity of causal factors that contribute to tax shortfalls or to surmount the opacity of taxpayer behavior. She acknowledges that pursuing accountability for tax abuses will require addressing not only state but corporate conduct.
Part II examines the global dimensions of tax policies and abuses, and the efficacy of institutional responses to date. Alex Cobham tackles questions of accountability by focusing on the role of states in actively procuring profit shifting across borders. He emphasizes taxation as a social act, with the potential not only to build or poison the social contract domestically, but to strengthen or undermine inter-state relations in the global community and the capacities of other states to fulfill the rights of their people. After sketching the different perceptions of state responsibility for financial secrecy and tax avoidance globally, Cobham identifies several tools that can be used to challenge the state’s role in profit shifting. These range from state-shaming through human rights instruments, to inter-state claims under World Trade Organization (WTO) procedures and unilateral or multilateral tax measures that would affect state behavior.
Nicholas Lusiani and Mary Cosgrove examine the challenges of attributing responsibility for the cross-border impacts of tax and financial secrecy policies through “spillover assessments.” They highlight the consequences of the human rights community’s neglect of tough issues regarding public financing: human rights experts have been sidelined in debates about the fiscal foundations of social progress, and remain largely ignorant of one of “the most fundamental ways through which power and equality are mediated in society and in the economy: taxation.”41 The authors identify ten principles, based on eight lessons from experience with other types of impact assessments, which can help enhance the human rights-compatibility of tax spillover assessments. But they also acknowledge the significant methodological and political hurdles that remain to ensure all countries assess and address the impacts of their tax policies beyond their borders.
Chapters by Michael Lennard, Annet Oguttu, and Monica Iyer provide critical reflections on the promise and limitations of international tax reform efforts. In particular, they consider how discussions of problems that are truly global in scope have been dominated by a limited number of powerful countries and have expressly left untouched the fundamental biases in the international tax regime in favor of residence countries over source countries. They interrogate the consistency of international reform proposals with human rights principles and imperatives, including self-determination, equal representation, and access to information. Beginning from the premise that addressing losses of revenue due to tax abuses and improving the international tax system is critical to the realization of human rights
globally, Lennard takes an in-depth look at the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Project, critically examining the rhetorical commitments of OECD members to treating developing countries on an “equal footing.” He highlights the systematic exclusion of non-OECD member countries from norm-setting bodies, and concerns about biases toward developed, capital-exporting countries in provisions regarding mandatory arbitration. These observations lead him to suggest that many of the BEPS outcomes will be less universally beneficial than advertised.
Oguttu and Iyer assess whether key components of the international tax reforms agreed through the BEPS Project will ensure that African countries get their fair share of taxes from multinational corporations operating within their borders, thereby in principle enabling the relevant governments to deliver on their human rights obligations. They focus on several of the abusive tax practices that are most concerning to African countries, as net capital-importers— namely, improper deductions of intragroup interest payments, payments for services, and payments of royalties for the use of intellectual property.
Part III turns to the responsibilities of states for enhancing tax transparency, and the tensions that exist between transparency measures and competing conceptions of the human rights of taxpayers and the public at large. Reuven Avi-Yonah and Gianluca Mazzoni explore the appropriate balance between strengthening tax revenue collection tools to ensure states have adequate resources to meet their human rights obligations, and protecting taxpayer rights to privacy and data security. Some readers may find controversial the authors’ characterization of “legitimate protection of trade secrets” as a human right, but all will appreciate their careful analysis of the compatibility of corporate reporting obligations and other tax transparency measures under OECD and US requirements with the framework on privacy and data protection under the European Convention on Human Rights. The authors contend that current automatic information exchange requirements are overbroad and thus risk infringing on privacy and information rights. They call for enhanced due diligence procedures. On the other hand, they argue that public country-by-country reporting requirements would not infringe on taxpayer rights, both because corporations already make much of this information available and because legal entities do not have privacy rights.
As Joshua Blank and Arthur Cockfield discuss in their respective chapters, the design and timing of tax transparency measures can influence their efficacy. While challenging the conventional defenses of corporate tax privacy, Blank argues that such privacy may actually help limit the pressure faced by corporations to pursue more aggressive tax strategies. Adopting an “intercorporate” perspective, Blank contends that if firms had access to increased information about their competitors’ tax practices, they could engage in reverse engineering or benchmarking, which could ultimately drive more tax avoidance. Blank does not categorically oppose increased corporate tax transparency in light of these risks, but rather calls on policymakers and human rights advocates interested in public disclosure to consider these unexpected consequences and the strategic defenses of tax privacy when evaluating reform proposals.
Arthur Cockfield takes a close look at exchange of information (EOI) policies, which have developed in recent years with a speed uncharacteristic of the tax field. He proposes several ways to make EOI policies fairer and more efficient, so as to maximize their potential to reduce illicit financial flows and curb abusive tax practices that undermine human rights. Cockfield calls for a focus on the exchange of high-quality information that can be cross-indexed and is useful to and verifiable by governments, while recognizing the challenges posed by taxpayer privacy concerns and misaligned government incentives.
In her chapter, Tracy Kaye warns of the risks of allowing a country as influential as the United States to lag behind in the global movement for tax transparency, and highlights the human
