Last year French economist Thomas Piketty put the issue of the relationship between taxes and inequality under the global spotlight. Piketty proposes a global tax on wealth to avoid the majority of wealth to continue coming under control of a small minority and to help reduce soaring inequality and poverty, which have profound negative social and economic consequences for countries and their citizens. Recent scandals on tax havens in both rich and poor countries have also raised concerns among governments about the detrimental effects that the use of offshore jurisdictions and other tax evasion measures can have on their budgets and their ensuing ability to deal with the basic provision of education, health, or infrastructure.
The heated debate in the economics field, however, seems to have completely circumvented the human rights field, even while poverty and inequality are profoundly related to the gravest violations of human rights. Taxes –including structures, uses, and tax havens- are strikingly absent from human rights research and debates. In fact, the database from the Foundation Center, which contains information on more than 17,000 grant recipients in 161 countries, reveals that among all the diverse activities and topics that human rights organizations participate, taxation does not figure as a central topic in any of them. This suggests as well that private funders themselves conceptualize work on tax reform to be outside the purview of human rights. Two important recent exceptions are the work by Business and Human Rights Research Center and the International Bar Association’s Human Rights Institute (IBAHRI).
My inkling is that taxes have been excluded from human rights for at least two reasons. Historically the exclusion can be traced back to the Cold War Era in which the Northern human rights movement rejected anything with a suggestion of communism, like socioeconomic rights or policies to combat inequality (including progressive taxes which put the tax burden on the rich), and instead prioritized almost exclusively civil and political rights. Second, the highly specialized nature of taxes has led human rights, but also fields like sociology, to relinquish taxes to the economists. Another possibleexplanation is that scholars who study poverty and inequality ignore the effects of taxation because they think them so obvious as to need no investigation. All reasons are equally detrimental for human rights.
How are taxes connected to human rights or how should they be? Why should human rights researchers and activists in the Global South care about taxes?
Taxes serve a wide array of important purposes connected to human rights. The most obvious is to raise revenue, which allows states to pay for education, health, infrastructure, welfare programs, and even courts systems. A country’s tax structure can either redistribute wealth and income and hence tackle inequality, or reinforce it. Taxes like income taxes, corporate taxes, and property taxes, tend to be progressive – meaning the richest individuals pay more into the system- and thus help combat inequality. However, taxes such as the value added tax (VAT) tend to be regressive, burdening the poor disproportionately. Counterintuitively, however, recent sociological studies have found that the most generous welfare states rely most heavily on regressive taxes. Taxation can also promote citizen participation and accountability, which are fundamental not only as human rights per se but to guarantee the protection of other human rights. The social contract theory of taxation states that if citizens pay taxes, they will demand a better and more accountable government in return.
If the type and amount of taxes can help reduce poverty and help in the provision of basic human rights, the absence of tax money has the opposite effect. Tax havens fuel global poverty. Just between 2010 and 2012, the Democratic Republic of Congo lost over US$1.3billion – or almost twice its combined health and education budgets. This was as a result of five mining agreements struck by firms based in the British Virgin Islands, Bermuda, Jersey, Gibraltar, and the UK. Tax exceptions and complex preferential treatments to multinational corporations also result in individuals and corporations not paying their fair share of taxes. One big concern in many developing countries is the negotiation of tax holidays and concessions in mining agreements, which impede governments from harnessing the opportunities created by the extraction of natural resources for development while causing profound negative social impacts. As the IBAHRI report concluded, “The best estimates tell us that tax abuses are the most significant illicit financial flow out of the developing world, eclipsing the amount of official development aid that is invested in those countries.”
So what can human rights organizations and scholars do? There is clearly no silver bullet for such a thorny problem. But we could begin with a five-piece recipe for human rights research and advocacy:
- Increasing research on the taxes and tax practices of countries and multinational corporations, with the ultimate goal of developing tax systems that enhance citizens’ access to health, education, welfare programs and infrastructure.
- Pushing for greater transparency in local and global financial systems and promoting advocacy against offshore tax havens.
- Urging governments to remove tax concessions for and increase taxation on extractive industries, known for having extremely lax tax regimes.
- Motivating public censure if the tax practices of companies prove to be abusive.
- Increasing transparency of mineral extraction taxation as well as the use of mining revenue to support local socioeconomic development, as suggested by The Natural Resource Charter.
The neglect of taxes in human rights not only aggravates human rights; it also marginalizes human rights discourse by excluding it from the most salient policy debates about these issues in our time. It’s time to bring taxes to human rights.
*Diana Rodríguez Franco is a PhD Candidate in Sociology at Northwestern University and a researcher at The Center for Law, Justice and Society (Dejusticia).