The facilitation of tax avoidance strategies could constitute a violation of international human rights law, according to a new report by the International Bar Association.
The
The report,
The IBA report draws on case studies from Brazil, the Isle of Jersey and Southern Africa, examining where to draw the line between legitimate tax avoidance maneuvers and immoral tax practices. The report highlights concerns over the “morality” of sophisticated tax planning strategies, in which corporations and wealthy individuals end up paying little or no money in taxes. Among the types of tax behavior seen as potentially abusive are 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.
“The fact that sophisticated tax planning strategies are technically legal is no longer a justification for their use,” said Yale University professor Thomas Pogge, who chairs the IBA Human Rights Institute Task Force. “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 fulfill the civil, political, economic and social rights of citizens.”
The report urges states to implement international standards of transparency and information exchange in tax matters, and businesses to undertake due diligence measures and impact assessment of all operations, including tax planning strategies. Lawyers also need to balance their obligations to defend their clients’ interests with their responsibilities to uphold human rights in their practice, including with respect to tax planning strategies, the report argues.
“The legal profession has an important role to play in confronting the negative effects of tax abuses on human rights,” said Sternford Moyo, who co-chairs the IBA Human Rights Institute and is a member of the task force. “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.”
The report also takes note of the role of accountants, quoting one unnamed expert interviewed by the task force who observed, “Those who siphon funds out of developing countries can and should know that they are thereby actively diminishing funds that go to efforts to reduce poverty. And those who facilitate tax abuse (e.g., tax havens, secrecy jurisdictions, and certain lawyers and accountants) can and should know that their activities likewise take funds away from efforts to reduce poverty.”