Facilitating tax abuses could constitute violation of international human rights concludes new IBAHRI Task Force Report
A new International Bar Association’s Human Rights Institute (IBAHRI) Task Force report, finds that actions of states that encourage or facilitate tax abuses, or that deliberately frustrate the efforts of other states to counter tax abuses, could constitute a violation of their international human rights obligations, particularly with respect to economic, social and cultural rights (ESCR).
The report, entitled, Tax abuses, Poverty and Human Rights, wasreleased today during the 2013 International Bar Association (IBA) Annual Conference, taking place in Boston, USA.
Prepared by the IBAHRI Task Force on Illicit Financial Flows, Poverty and Human Rights, the Report asserts that tax abuses (that is tax practices contrary to the letter or spirit of international and domestic tax laws and policies) have a significant negative impact on the realisation of human rights in developing countries. Profits flowing out of developing countries deprive governments of the resources to alleviate poverty and uphold international human rights standards, in particular ESCR.
Drawing on case studies from Brazil, Jersey and the SADC (Southern African Development Community) Region, Tax abuses, Poverty and Human Rights addresses pertinent questions relating to where to draw the line between legitimate tax avoidance and immoral tax practises. The report highlights concern over the ‘morality’ of sophisticated tax planning strategies, whereby corporations and wealthy individuals end up paying little or no tax. Categories of tax behaviour repeatedly emphasised by stakeholders as potentially abusive include: transfer pricing and other cross-border intra-group transactions; the negotiation of tax holidays and incentives; the taxation of natural resources and the use of offshore accounts.
Thomas Pogge, Leitner Professor of Philosophy and International Affairs at Yale University, USA and Task Force Chair said, ‘The fact that sophisticated tax planning strategies are technically legal is no longer a justification for their use. The impact of tax abuses, facilitated by secrecy jurisdictions, on global poverty is tremendous. The international community has not only a legal obligation but also a moral duty to ensure that states use the maximum resources available to fulfil the civil, political, economic and social rights of citizens’.
The 264-page Report, based on extensive consultation over an 18-month period, highlights tax abuses as a pressing human rights issue and delivers recommendations for states, businesses and the legal profession. The Report urges:
States to implement international standards of transparency and information exchange in tax matters effectively;
Businesses to undertake due diligence measures and impact assessment of all operations, including with respect to tax planning strategies; and
Lawyers to balance their obligations to defend clients’ interest with the responsibilities to uphold human rights in their practice, including with respect to tax planning strategies.
Speaking specifically on the role of lawyers to counter tax abuses, Sternford Moyo, IBAHRI Co-Chair and Task Force Member commented, ‘The legal profession has an important role to play in confronting the negative effects of tax abuses on human rights. Lawyers have a duty to balance their obligation to their client’s interests with their obligations to uphold human rights and the rule of law.’
Click here to download the new report Tax abuses, Poverty and Human Rights.
Notes to the Editor
Tax Abuses Poverty and Human Rightscomprises three core chapters:
Chapter One provides an overview of tax abuses and secrecy jurisdictions. It includes two sections: Section 1.1 examines definitional issues related to tax evasion and tax avoidance and settles on the term ‘tax abuses’ to cover the types of illegal and illicit tax behaviour that have the most serious negative impact on poverty and human rights, particularly in developing countries. Section 1.2 illustrates how bank secrecy facilitates tax abuses with case studies of Switzerland, Singapore and Jersey.
Chapter Two analyses the impact of tax abuses on poverty and human rights. It contains four sections: Section 2.1 explains why improved tax governance is critical to the goals of eradicating poverty and of diminishing the dependency of developing countries on foreign aid. Section 2.2 discusses poverty as both a cause and a consequence of violations of human rights. Section 2.3 examines the responsibilities of different players − states, business enterprises and their professional advisers − to address tax abuses and their negative effects on poverty and human rights. Section 2.4 details the remedies available to address tax abuses.
Chapter Three completes the report with the Task Force’s conclusions and its recommendations. Given the mandate and membership of the IBA, the report includes specific recommendations, not only for states and business enterprises, but also for the legal profession, including bar associations and law firms.
Task Force Members:
Professor Stephen B Cohen, Professor of Law, Georgetown University, USA
Mr Sternford Moyo, IBAHRI Co-Chair; Senior Partner, Scanlen and Holderness, Zimbabwe
Professor Robin Palmer, Director of the Institute for Professional Legal Training (IPLT), University of KwaZulu-Natal, South Africa
Professor Thomas Pogge, Leitner Professor of Philosophy and International Affairs, Yale University, USA (Task Force Chair)
Professor Celia Wells, Head of Bristol University Law School, UK
Task Force Rapporteur: Lloyd Lipsett, International Lawyer, Canada
Task Force Facilitators: Shirley Pouget, IBAHRI Programme Lawyer, UK and Dr Phillip Tahmindjis AM, IBAHRI Director, UK
Background to the Task Force:
The IBAHRI convened a task force on illicit financial flows, poverty and human rights to analyse how illicit financial flows, and specifically the proceeds of tax evasion, contribute to poverty and subsequently affect the enforcement of economic-socio and cultural rights.
Terms of reference:
To investigate links between illicit financial flows, human rights and poverty and in particular to examine the extent to which illicit financial flows and commercial tax evasion impact on poverty and subsequently affect the implementation and enforcement of ESCR.
To analyse human rights norms and international regulations applicable to tax matters.
To examine any relevant related matters, including the responsibilities of all stakeholders.
To write and publish a book containing the findings of the Task Force, with recommendations.
Goals and objectives
To publish an innovative report containing findings and a set of recommendations on the interaction between illicit financial flows, poverty and human rights.
To widely disseminate the report with the view of pushing the issue of tax evasion and human rights onto global policy agendas, and sustaining discussion thereafter.
To incite multi-level policy changes in the area of tax evasion and ECSR adjudication to help end global poverty.
The Task Force research methodology emphasised a series of mutually reinforcing consultations in order to provide an informed and balanced analysis. The Task Force met in plenary in March 2012 and October 2012. The Task Force Rapporteur undertook desk research with the support of the Task Force Facilitator. The desk research covered a wide range of topics. The Task Force Rapporteur interviewed: tax and revenue authorities from developed and developing countries; officials of multilateral organisations concerned with tax cooperation, development and human rights; corporate and tax lawyers; representatives of multinational corporations; and civil society organisations. A list of interviewees is included at Appendix B of the Report. A questionnaire was developed as a starting point for interviews and consultation meetings with different stakeholders. It was also circulated to the membership of the IBA to canvas opinions from the legal profession about key themes related to the Task Force’s research. Over 40 detailed written responses were provided to the Task Force. A copy of the questionnaire is included in Appendix C. A number of in-country consultations were organised to obtain further information and input from lawyers and other stakeholders with direct experience of the issues relevant to the Task Force’s research. A consultation meeting for Latin America was held in Sao Paulo, Brazil in June 2012, with additional meetings in Rio de Janeiro and Brasilia. A consultation meeting for the SADC region was held in Swaziland in August 2012, with additional meetings in South Africa and Zimbabwe. A mission to Jersey was also took place in January 2013 for the purpose of interviews with government officials, lawyers, representatives of financial institutions and other stakeholders. Summaries of the Brazil, SADC and Jersey missions are included in Appendix D. Finally, a number of research papers and expert opinions were commissioned from lawyers, law students and interns from the IBAHRI.
· The 2013 International Bar Association (IBA) Annual Conference takes place 6-11 October 2013 at the John B Hynes Veterans Memorial Convention Center 900 Boylston Street, Boston, MA.
· The Conference is the largest yearly gathering of the world’s international lawyers. There are approximately 5,500 delegates from 134 countries attending the event. The Former United States Secretary of State, Madeleine Albright, gave the keynote address at the Opening Ceremony on Sunday 6 October.
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About the International Bar Association
the global voice of the legal profession
The International Bar Association (IBA), established in 1947, is the world’s leading organisation of international legal practitioners, bar associations and law societies. Through its global membership of individual lawyers, law firms, bar associations and law societies it influences the development of international law reform and shapes the future of the legal profession throughout the world.
The IBA’s administrative office is in London. Regional offices are located in São Paulo, Brazil; Seoul, South Korea; and Washington DC, United States of America, while the IBA’s International Criminal Court Programme is managed from an office in The Hague.
The IBA’s Human Rights Institute works to promote, protect and enforce human rights under a just Rule of Law, and to preserve the independence of the judiciary and the legal profession worldwide.