Tax avoidance and human rights

November 2017

Paradise Papers the latest to shine a light on the multi-billion pound avoidance industry

The publication of the Paradise Papers which have revealed yet more insights and names of those engaged in the murky world of massive tax avoidance, has so far stayed clear of discussing the human rights angle to this activity.  A letter in today’s Guardian newspaper, written jointly by Helena Kennedy and Hans Corel, draws attention to this particular aspect.  The huge outflow of resources from the developing world means governments are starved of the resources to tackle poverty, improve their health and education systems and to upgrade infrastructure generally.  A staggering $859bn was lost in 2010 and the cumulative loss between 2001 and 2010 amounted to $5.86trn *.  It often comes a surprise to people when it is pointed out for example that Africa, taken as a whole, is a net creditor to the rest of the world.  This is a combination of corruption, resource extraction and tax avoidance.  So while aid is paid into the country, more money flows out because of tax avoidance and criminal activity.

The Paradise Papers follows on from other leaks including the Panama Papers, Lux leaks and others which exposes the scale of the perfectly legal tax avoidance industry and names some of those involved.  These have included the Queen’s Duchy of Lancaster estate, Prince Charles and a slew of celebrities, media and sports people.  Several said they did not know this was being done in their name.

The letter draws attention to a report prepared by the International Bar Association in 2013.  This 262 page report examines exhaustively the nature of this activity and came before some of the recent revelations.  The key question for us is the link between this activity and human rights and the report discusses this in detail since it is not entirely direct.  In the report is says:

Most stakeholders tended to agree that there is an important distinction between labelling tax abuses as ‘legal violations of human rights’ versus stating that tax abuses have ‘negative impacts on human rights’.  Depending on the scope and scale of the tax abuses, they might have a significant impact on human rights.  As one tax authority expressed it: ‘What do we need to fulfill economic, social and cultural rights?  Resources including taxes.  Therefore, tax abuses are clearly a human rights issue when massive amounts are lost from State revenues.’ p96

To the extent that tax abuses have an impact on poverty and that poverty has an impact on human rights, as outlined above, it is possible to make a connection between tax abuses and human rights.  Most simply put, tax abuses deprive governments of the resources required to respect, promote and fulfil human rights. More dramatic examples of human rights impacts can be imagined when you juxtapose the billions of dollars that are said to be flowing out of developing countries with the comparatively small amounts that are required to lift individuals, families and communities out of the most extreme forms of poverty. p103

In a summary on p148  they say:

Human rights have not often been part of the global debate about tax matters. However, a human rights analysis can strengthen our understanding of poverty and development, as well as reinforce our determination to confront tax abuses.  In the recently adopted UN Guiding Principles on Extreme Poverty and Human Rights, the UN Special Rapporteur on Extreme Poverty and Human Rights describes how extreme poverty is connected as a cause or consequence of violations of numerous human rights, including all the key human rights principles − ranging from the right to life, the right to food, the right to health, the right to education, the right to social security and principles of non-discrimination, participation, transparency and accountability.

Simply put, tax abuses deprive governments of the resources required to provide the programmes that give effect to economic, social and cultural rights, and to create and strengthen the institutions that uphold civil and political rights.  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.  p148  Our italics

It is important to recognise therefore that this is not a victimless activity.

The City of London is a key player in the avoidance industry and is surrounded by a worldwide network of islands which have secrecy in one form or another as part of their appeal to international corporations, rich individuals, criminals and despotic governments.  These include the Isle of Man, Jersey, British Virgin Islands, and several more.

The report also devotes space to non-state actors and in particular the international corporations such as Apple, Amazon, Starbucks and several others.  These are able to move funds between one jurisdiction and another employing various legal techniques such as ‘The Swiss Role’ ‘Going Dutch’ and Thinning on Top’.  Apple featured most strongly in the latest revelations.

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For those who would like to read the report in full it can be accessed from this link.  Full report

*586 000 000 000 000 US dollars