Tax Justice and Human Rights

Friday File – Representatives from human rights organisations, and tax justice experts and activists met this week in Lima, Peru to strategise about ‘Advancing Tax Justice through Human Rights’[i].  AWIDs Ana Ines Abelenda was there to explore the linkages between taxation policies and social and gender justice by using human rights instruments and commitments as a powerful tool.

Tax systems are important fiscal tools for directing the processes of economic growth and are used to redistribute wealth and encourage socially acceptable behaviour by re-pricing certain goods and services (e.g. excises on cigarettes and alcohol). Mobilizing public domestic resources through tax revenue is becoming increasingly difficult in a context marked by extreme tax competition to attract corporate investments, austerity measures and illicit financial flows.  This is has a negative impact governments’ efforts to ensure social protection floors are in place to protect and fulfill women’s human rights and gender equality.

Neoliberal austerity measures are drastically reducing policy space for national governments to design progressive taxation schemes. Tax abuses, illicit financial flows, tax evasion and the weight of debt payments from developing to developed countries reduces revenue available to national governments for development and fulfillment of human rights, including women’s rights. A recent study conducted by Eurodad found that developing countries are losing twice the amount of money they earn because of issues like tax evasion, profits taken out by foreign investors and interest repayments on debt.

Trends and current landscape on tax systems vis a vis gender justice

Fiscal policies are not gender neutral. In fact, tax systems hinge on certain concepts and assumptions that are themselves gendered (e.g. ‘breadwinner,’ ‘household,). These assumptions tend to put women at a disadvantage reinforcing stereotypes about women’s income being secondary to that of the male breadwinner, and does not recognize nor help to distribute unpaid care work.

The current “race to the bottom” in which tax competition among developing countries takes place to attract corporate and foreign direct investment is having a negative impact on government budgets needed to finance the advancement of women’s rights. Decrease in government revenues often lead to cuts in social expenditure in key areas such as health, education, public jobs, care work, with disproportionate impact on women who often shoulder a greater unpaid care burden.

Responses to the financial crisis in 2008 highlight the catastrophic and inequitable impacts of austerity measures, including those of fiscal policy aiming to lower public expenditure, on the poorest and most vulnerable. Cuts in vital social protection sectors such as health care, education, unemployment insurance, pensions, care systems have undermined the lives of people and signify a regression and neglect in the fulfillment of human rights. Women have become the safety nets of last resort to sustain their families and social structure.

Poorly designed fiscal policies undermine progress towards gender equality. But policy makers are yet to make the clear connection, even with increasing concerns that tax systems are biased against women, and, that contemporary tax reforms may increase the incidence of taxation on the poorest women while failing to generate enough revenue to fund the programmes needed to improve these women’s lives.

Current trends in tax reform indicate a big shift away from taxing income to taxing consumption, through value-added taxes, which is significant given gendered consumption patterns – i.e. women take care of a larger proportion of household expenditure and thus the extent to which the value-added tax (VAT) is applied to basic consumption goods such as food affects women disproportionately. Policy makers should carefully consider the set of goods and services that should be domestically zero-rated or exempted.

Assessment of impacts of fiscal policy —with data disaggregated by sex and social group—is essential to ensuring these and other economic policies do no harm but rather even have positive impacts across the board, including on women of diverse backgrounds.

Gender-responsive budgeting

Gender budgeting requires that governments invest more in those sectors that will have direct positive impact on access to basic needs. Gender budgeting should be constructed and implemented in ways that respect, protect and fulfill human rights for all, and guarantee the democratic participation of stakeholders, including women’s rights movements. Gender budgeting also has much more potential for success where finance ministers are involved in policy decisions.

At the same time it is important to bear in mind that gender budgeting alone will not achieve gender equality and women’s rights. Financing at large including matters such as policy coherence for development, need to contribute towards this end.

Another key issue is that allocation of money to gender equality is not enough. Governments need to track how the money is spent and CSOs must demand accountability. In addition for gender-responsive budgeting to be effective there needs to be political will and Government commitment to gender equality through the allocation of resources to their national policies, programs, laws; gender analysis capacity development of those working on budgeting; proper systems in place to allocate money efficiently and effectively and participation by women’s rights organisations.

Some proposed strategies

Governments should establish robust mechanisms for taxing the corporate sector and reforming the financial structure through progressive redistributive measures. For example, incorporating financial transaction taxes which, according to estimates, could raise as much as $650 billion and at the same time regulate markets that tend to have a destabilizing trading practices.

But taxing the rich 1%, though crucial to raise revenues, still only addresses the consequences of inequality, not the root causes that enabled such an outrageous concentration of wealth in hands of the few to occur in the first place. Challenging the lack of regulation of the growing financial economy that allows big companies and rich individuals to pay minimal or no tax is essential to addressing social inequality and human rights.

There needs to be a shift from indirect taxes to direct taxes will serve as a more progressive and equitable system of taxation. Governments should refrain from attaching additional taxes to certain goods and services e.g in form of VAT.

Greater international tax cooperation is needed, something that could be achieved by upgrading the UN Tax Committee so that governments can coordinate national taxation regimes to ensure corporate tax rates deal with trade mispricing and other tactics used by multinational corporations to avoid paying taxes.

Accountability and transparency are fundamental to evaluate if pledged resources are actually disbursed and where they are going and there are some existing experiences with tracking funding allocations. For example, GENDERNET in collaboration with UN Women developed the Global Partnership indicator on gender equality that “provides data on whether governments track allocations for gender equality and make this information public. It is an entry point for ensuring that domestic resource allocations benefit women and men equally”[ii].

The use of CEDAW, the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) can be a very important tool to put fiscal policies to account for their impact on women. It could integrate mechanisms to track funding for women’s rights as part of reviewing the duty of member States to finance the realization of women’s rights.

In a nutshell, strengthening the role of human rights frameworks in fiscal policy decision-making is key. Human right instruments and mechanisms should be the basis for ethical and accountability frameworks, challenging the current narrow focus on efficiency and growth that has only taken us to the dismantling of social protection floors with dire consequences for human rights, especially women’s rights.