June 2015 Discussion: Monitoring Fiscal Policy
Several working group members recently participated in an International Strategy Meeting on Advancing Tax Justice through Human Rights in Lima, Peru which brought together human rights practitioners and tax justice advocates for strategy-exchange and alliance-forming. A major theme at the meeting was the need for more rigorous evidence-based scrutiny of the human rights implications of tax laws, policies and practices in order to challenge the often unsubstantiated assumptions about the economic benefits of maintaining the current status quo.
Why is it important for human rights advocates to monitor tax policies?
Dedicating maximum available resources to the realization of economic, social and cultural rights is a key obligation enshrined in the Covenant on Economic, Social and Cultural Rights. While not so stipulated in associated treaties, civil and political rights also cost enormous amounts of money—be it in financing free and fair elections, humane prison conditions, accountable policing, robust regulatory bodies or an independent judiciary.
Mobilizing available resources for human rights is not just about allocating existing resources effectively (i.e. “dividing the pie”, as the saying goes), which often leads to different social sectors fighting over the crumbs allotted to basic public services. This obligation also hold governments bound to effectively mobilize resources (i.e. to increase the size of the pie) in equitable ways. For this reason, it is important to monitor how governments are generating, as well as spending, resources.
Governments mobilize most of their domestic resources for essential services and infrastructure through taxation. Nevertheless, examples from around the world show how mass-scale tax abuse deprives governments of the resources they need to fulfill their human rights commitments. Inequitable tax policies—have perpetuated inequalities of all kinds and placed disproportionate burdens on women and others facing systemic discrimination. Regressive tax regimes have protected the wealth and privilege of elites at the expense of the whole population. The widespread reliance on indirect taxes on goods and services, such as Value Added Tax (VAT), generally imposes a larger burden on the poor and women who spend a larger percentage of their money on goods and services. In the context of growing inequality and deepening fiscal austerity, tax policy provides an essential tool to sufficiently, equitably and accountably finance human rights.
How can human rights advocates monitor tax policies?
Tax is not explicitly discussed in any international human rights treaty. Although there is growing recognition of the links between tax policies and human rights violations, human rights norms do not prescribe specific amounts of money that governments should be raising through taxation or specific ways they should be raising taxes. Accordingly, human rights advocates have had to expand the tools they use to evaluate tax policies against human rights norms. Identifying indicators that can be compared across countries, over time and according to different social groups has been a key strategy in this regard.
For example, the Center for Women’s Global Leadership (CWGL) has developed a methodology for a human rights audit of economic policy which has been used to uncover class, race, and gender implication in specific tax policies in the US.
The Center for Economic and Social Rights (CESR) has similarly identified illustrative indicators that can be used to determine whether governments are mobilizing resource sufficiently, equitably and accountably, in line with human rights. CESR has also analyzed fiscal policy in a number of countries, including href="http://cesr.org/downloads/FACTSHEET_Spain_2015_web.pdf" target="_blank" data-cke-saved-href="http://cesr.org/downloads/FACTSHEET_Spain_2015_web.pdf">Spain and Egypt, showing that decisions about how resource decisions were out of step with human rights duties, and moreover how proactively applying human rights standards could suggest concrete tax policy reforms.
During the last fiscal reform in Mexico, Fundar also used human rights arguments to advocate for progressive taxes and to criticize regressive ones.
Meanwhile, IBP’s open budget index has been used by countless human rights advocates to push for more transparent budget (and tax) policies. Oxfam meanwhile is in the process of developing indices to better track how well governments’ fiscal policies are combating inequality.
It would be great to hear from other working group members that have addressed issues related to tax or fiscal policy in their monitoring work.
What are some of the challenges in monitoring tax policies and how can they be addressed?
A major challenge in monitoring tax policy is the lack of access to open, reliable fiscal data and related financial information. At the meeting, ACIJ discussed their efforts to use litigation as a tool for gaining access to financial information for budget analysis. Indeed, the fact that access to information is enshrined as a core human rights norm was raised by a number of meeting participants as one of the concrete ways that human rights could add value to tax justice advocacy.
Another recurring theme was the challenge of making tax meaningful to communities; it’s a topic that often seen as too technical and it is hard to mobilize the public to engage on the issues. Accordingly, increasing financial literacy among the human rights community and among the public more generally is needed.
Finally, the extraterritorial nature of tax policy is a huge challenge in monitoring. The tax policies or practices of one government (e.g. preferential corporate tax regimes for internationally mobile capital, obstructing tax information exchange, or allowing banks and law firms to exploit secrecy arrangements) can erode the capacity of others to resource human rights. Data on cross-border tax abuse is a huge challenge, which should receive much more attention in the coming decade. Human rights advocates could support overcoming this black hole in myriad ways, for example by protecting whistleblowers and tax justice advocates who are exposing these abuses, or by utilizing creative litigation to open up the workings of abusive tax planning.
We'd love to hear from working group members whether this is a topic that there is interest in exploring further through our collective work.