Two weeks ago (On 23 June 2017), the UN Committee on Economic, Social and Cultural Rights has released their General Comment No. 24. This recent authoritative interpretation of the human rights obligation of the state in the context of business activities is a significant development since the UN Guiding Principles on Business and Human Rights were adopted in 2011.
Many issues were addressed in this Comment including trade and investment, business incentives, supply chain, natural resources contract and privatisation. But, one of the progressive comments which also in time with the current global affairs is related to unfair taxation system.
The Committee highlights two main opinions regarding taxation system. First, enforcing progressive taxation schemes is encouraged to maximize a mobilisation of resources for the human rights fulfilment. Second, the practice of tax competition by imposing a minimum corporation tax rate, providing home for and permissive rules to tax evasion, tax avoidance and excessive protection to bank secrecy is not only inconsistent with the responsibility of the states to develop international cooperation to fulfil human rights, but also undermines the ability of state to mobilise resources to realize economic, social and cultural rights.
Regarding tax competition, the committee affirms that ‘lowering the rates of corporate taxes with a sole view to attracting investors encourages a race to the bottom that ultimately undermines the ability of all States to mobilize resources domestically to realize Covenant rights’. In addition, the committee’s comment also underlines that even if countries chose not to raise taxes on corporations, and instead have well funded public services through other forms of taxation, their actions impact on the ability of other states to raise tax. By this reason, therefore, the obligation of the states to address the adverse impact of unfair taxation system moves beyond its traditional domestic jurisdiction. In other words, the states have extraterritorial obligation to respect, protect and fulfil the covenant, as previously suggested by the Maastricht Principles.
In the absence of international remedy mechanism for tax abuse, this development shows a significant role of UN Committee in combating tax abuse. Previously, the UN involvement in seeking interpretation for the implementation of covenant resulted in the final study on illicit financial flows, human rights and the 2030 Agenda for Sustainable Development of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights released in 15 January 2016. In the same year, UN Committee on the CEDAW and UN Committee on ESCR both ruled that the financial secrecy laws and lax corporate reporting standards of Switzerland and UK, were inconsistent with their human rights duties under international treaties.
