Tax Evasion Is A Violation Of Human Rights

This week, Tine Destrooper, Managing Director of the Center for Human Rights and Global Justice at New York University, followed the #PanamaPapers articles with the same indignation as millions of people worldwide. According to her, the contribution of tax avoidance and tax evasion to the violation of the most vulnerable people’s human rights, is neglected. Government authorities are responsible.

  • Teacher's Dude BBQ (CC BY-SA 2.0) ‘When people residing at the top of the economic pyramid find a way to evade taxes, this affects the economically most vulnerable groups.’ Teacher's Dude BBQ (CC BY-SA 2.0)

Journalists linked to the International Consortium of Investigative Journalists published numerous articles on the so-called #PanamaPapers this week. They showed prominent politicians, businessmen and top sportsmen involved in a structural form of tax evasion. Alongside Knack, De Tijd and Le Soir, MO* was one of Belgian media outlets involved in the investigation.

The revelations caused political shock waves and outrage as dozens of political leaders appeared to have made use of obscure fiscal and financial legislation to divert financial means to several offshore tax havens. 

Aside from the moral indignation, it is important to pay attention to the structural impact of this large-scale form of tax evasion on the fundamental human rights of vulnerable groups.

Tax evasion and tax fraud undermine the potential of governments to protect and fulfill fundamental rights of their citizens.

Tax evasion and tax fraud result in a situation where great sums of money never reach government authorities as they should. They undermine the potential of these governments to protect and fulfill fundamental rights such as the right to education, housing or a reasonable standard of living. 

This is the case in the Global South, but also in Europe and the United States, and especially in countries where at present a Spartan austerity policy is being imposed, as is the case in Spain, where different former government officials and their families appear to be involved in tax evasion.

Even though there are no concrete numbers, which is perhaps impossible to attain in any case, Oxfam still managed to estimate that 190 billion dollars worldwide are involved due to a recent study on the amount of income states miss out on because of tax evasion. This sum is higher than the amount of money given to development cooperation, which added up to only 137 billion in 2014. This is a crucial revenue stream that could be spent on the construction of schools, hospitals or infrastructure.  

The role of politicians

While the problem of tax evasion itself is a threat for the fulfillment of human rights, the active role of politicians participating in these practices is self-evidently even more problematic. This is not only the case from a moral or judicial viewpoint, but is also clear keeping their responsibility towards guaranteeing human rights in mind.

Only over the last few years human rights specialists have begun taking fiscal justice and legislation seriously.

Under international legislation political leaders, and especially heads of state and government leaders, are first and foremost required to fulfill and guarantee a series of social, economical and cultural human rights. This week it became clear that exactly these leaders were in some cases closely involved with, or even responsible for, the organization of large-scale tax fraud. The personal responsibility of the named politicians is great, but their personal role may not distract attention from the policy decisions and structural problems that made this form of tax evasion legal. 

This type of fraud is not only a violation of their direct fiscal obligations, but also a violation of the fundamental obligation that states under international legislation should use ‘the maximum of their available means’ in order to protect, guarantee and fulfill social and economic rights - a duty that is described in legally binding treaties, which are signed by the concerning states. 

However, for years, even from the human rights institutions themselves, there has been very little attention for this subject. Tax experts and human rights experts did not maintain dialogue with each other for years and only over the last few years human rights specialists have begun taking fiscal justice and legislation seriously as they attempt to influence lawmakers in order to disprove the excuse that guaranteeing social and economical human rights is financially unfeasible. 

Grand Theft Autogenese?

The scandal that came to light this week also undermines the myth that extreme forms of inequality growing worldwide are only an accidental by-product of market dynamics. This inequality does not come into existence naturally. It is being actively reinforced by conscious immoral choices of prosperous individuals and leaders, and is strengthened by policy that makes these choices not only possible, but also practically invisible. 

By establishing an international fiscal system and subsequently undermining it, the involved elites are able to concentrate and accumulate both financial means and power. All the while salaries stagnate and crucial public services are suspended as part of austerity packages.

For instance, the Panama Papers reveal how an oil company successfully hired Mossack Fonseca to evade 400 million dollars of taxes in Uganda – an amount exceeding the entire public health budget of the country.

Women are the primary victims

In an article published last week by Open Democracy the authors argue not only that women are the primary victims of tax evasion but also that they are highly outnumbered by men in the list of individuals involved in the scandal. This might reflect how in general most of the dominant and influential positions of power are still held by men rather than by women.

When people residing at the top of the economic pyramid find a way to evade taxes, this affects the economically most vulnerable groups the most. In many cases the ratio of women in these groups is very high. 

When people residing at the top of the economic pyramid find a way to evade taxes, this affects the economically most vulnerable groups, which often count a large number of women, the most.

In most cases, tax evasion – and the resulting lack of revenue for governments – leads to cutbacks in expenditure on public services, like health care, child care or education. All over the world, these measures systematically have a larger impact on women and girls: families who are facing an increase in the cost of education and are thus forced into choosing which of their children they’ll sent to school, are likely to opt for their boys rather than their girls.

Furthermore, when a government is no longer able to take charge of the public services it’s supposed to provide due to a lack of revenue, women and girls are practically being forced into taking charge of these services themselves, which comes down to working unpaid jobs.

In addition, in order to compensate the losses in revenue from income tax and capital tax, governments often turn to alternative sources of taxation, like excessively high taxes on goods. Again, the latter kind of taxation primarily affects people within the low-income category, and consequently, women.

A momentum for reforms

Given the size of the scandal, it is understandable that journalists and researchers initially focus on the identities of those involved and on their level of involvement.

The construction of a more transparent, reasonable and fair fiscal regime should be a priority for governments.

However, once the dust of the current storm has settled, media and citizen groups have an important role to play in urging domestic and foreign political leaders to undertake concrete and structural actions that will lead to the construction of a more transparent, reasonable and fair fiscal regime in which taxpayers in general, and especially politicians, will be held accountable for their actions.

Within this context, both the language and the logic of human rights can serve as an inspiration to discuss accountability, inclusiveness and transparency.

Despite active and persistent policy work by NGOs and civil society organizations, and despite the growing attention for fiscal justice in international media, there has been little commitment over the past years to create structural solutions at an international level.

For instance, the Sustainable Development Goals (adopted last year by the United Nations as the successor of the Millennium Development Goals) describe a willingness to fight illegal financial transactions and inequality but they contain neither concrete objectives nor suggestions regarding the policy to deal with these matters, whereas for other goals up to more than a hundred policy indicators are included.

The Panama Papers could play an important role in stimulating and mobilizing governments to act according to the promises they made last year in New York and to make concrete policy suggestions, like the implementation of a worldwide system that ensures the automatic exchange of information about taxpayers, the implementation of standards with respect to reporting business-related financial transactions, or the establishment of a public register of economic ownership of assets in similar jurisdictions.

Tine Destrooper is the Managing Director of the Center for Human Rights and Global Justice at New York University. Her research focuses on women’s rights, intersectionality, social movements and the impact of socioeconomic inequality on the rights of vulnerable groups. Translated from Dutch to English by Zeynep Kubat & Bart Vereecke.

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Over de auteur

  • onderzoeker CHRGJ en Wissenschaftskolleg

    Tine Destrooper is onderzoeker aan het Centrum voor Mensenrechten aan New York University (CHRGJ) en aan het Wissenschaftskolleg Berlijn.