While the media and those financial services involved in tax crimes keep parroting “This is completely legal”, the United Nations Human Rights Council emphasises that it is a question of not only complying with the letter of tax laws, but also with the spirit of these laws. Avoiding paying taxes is detrimental to society and serves only the interests of the privileged few. Adam Smith recognised the responsibility of citizens to pay their taxes when he wrote in The Wealth of nations: “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”
Cross-posted from the United nations Human Rights Council
International corporations responsible for systematic tax abuse should be downgraded by rating agencies and investment funds in their environmental, social and governance performance, UN human rights experts have said, as information from the leaked Paradise Papers continues to be made public.
“States must stop harmful tax competition amongst each other and work together to stop unethical tax avoidance schemes for wealthy individuals and international corporations. Corporate tax abuse undermines social justice and human rights worldwide,” said Juan Pablo Bohoslavsky, whose remit as a UN Independent Expert includes monitoring the impact of illicit financial flows on human rights.
The Paradise Papers have exposed systematic tax avoidance schemes by well-known international corporations, making use of tax havens in places such as Bermuda, the Cayman Islands, and the Isle of Man.
“We call on businesses to assume their corporate responsibility, in line with the UN Guiding Principles on Business and Human Rights”, said Surya Deva, chairperson of the UN Working Group on Business and Human Rights. “All business enterprises have a responsibility to avoid adverse human rights impacts caused or contributed by their tax evasion practices”.
The experts stressed how business enterprises should comply with both the letter and spirit of tax laws and duly contribute to the public finances of the countries in which they operate, as also clarified in the OECD Guidelines for Multinational Enterprises.
The experts note that the series of scandals, including the Luxembourg and Bahamas leaks, the HSBC files, the Panama Papers, and now the Paradise Papers, made it clear there were widespread practices of tax abuse that had to be addressed.
“Wealthy individuals and international corporations are continuing to engage in unethical practices, reducing their tax burdens to minimal levels by using tax havens, which undermines the realisation of human rights” said Mr. Bohoslavsky.
The experts noted that many States are struggling with increased debt levels as tax revenues do not match public expenditure. “Instead reducing spending on social security, public health care, housing or education, Governments should make greater efforts to ensure tax justice,” the experts said
The experts pointed out that corporations use publicly-funded infrastructure to transport and sell their products, employ people who have normally been educated at public expense, and expect their managers and employees to receive publicly-funded health care when they are ill. Yet, corporations shift their profits around to reduce their own tax contribution to a minimum.
The experts also noted that the law firms that facilitate tax avoidance schemes must assume their responsibility.
“The UN Guiding Principles apply to law firms too – they should consider human rights implications of their legal advice given to businesses”, Mr. Deva noted, drawing attention to the Practical Guide on Business and Human Rights for Business Lawyers adopted by the International Bar Association in 2016.
“It is not sufficient for business corporations to ensure respect for human rights and international labour standards in business practices and value chains. These commitments have to extend to taxation, if firms are to be regarded as ethical,” the experts concluded.
The issue of corporate tax avoidance will also be addressed at the UN Forum on Business and Human Rights that will be held in Geneva, Switzerland, from 27 to 29 November 2017.
Mr. Juan Pablo Bohoslavsky (Argentina) was appointed as Independent Expert on the effects of foreign debt and human rights by the United Nations Human Rights Council on 8 May 2014. Before, he worked as a Sovereign Debt Expert for the United Nations Conference on Trade and Development (UNCTAD) where he coordinated an Expert Group on Responsible Sovereign Lending and Borrowing. His mandate covers all countries and has most recently been renewed by Human Rights Council resolution 34/3. One of his recent thematic reports has focussed on tax abuse and human rights.
The Working Group on human rights and transnational corporations and other business enterpriseswas established by the UN Human Rights Council in June 2011. Its current members are: Mr. Michael Addo, Mr. Surya Deva (current Chairperson), Mr. Dante Pesce, Ms. Anita Ramasastry (current vice chair) and Mr. Pavel Sulyandziga.
The Independent Experts are part of what is known as the Special Procedures of the Human Rights Council. Special Procedures, the largest body of independent experts in the UN Human Rights system, is the general name of the Council’s independent fact-finding and monitoring mechanisms that address either specific country situations or thematic issues in all parts of the world. Special Procedures’ experts work on a voluntary basis; they are not UN staff and do not receive a salary for their work. They are independent from any government or organization and serve in their individual capacity.
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