Realising Human Rights In International Tax Treaty Law

At the heart of any new treaty is the challenge of taxing multinational companies. Currently, the taxation of these global corporations in countries where they make their biggest profits, or where they derive the natural resources to make their products, is hindered by incentives offered by offshore jurisdictions. These offer lower taxation of dividends, interest, and intellectual property income received by a multinational’s profitable subsidiaries. Unfortunately, they also allow for the existence of a system that enables the creation of companies for money laundering, as well as other forms of criminality.

You may think people in developed countries should not support the development of a global tax treaty at the UN because they are benefitting from the status quo. However, the reality is that the global North is adversely affected by an unequal sharing of global resources, and this mix of individual jurisdictions creating novel approaches towards tax to attract investments (from any source). However, this is a truly important development for all peoples of the world for numerous reasons.

Firstly, immigrants living in the global North continue to send resources to their families and friends in the global South. Remittances are currently the largest and most stable source of foreign exchange for low and middle-income countries. Remittances are taking place because the resources that belong in the global South are not available in the South, forcing states to look for other ways to bring in foreign exchange. In an ideal and fair world, government processes would operate so that friends and family in developing countries do not bear the responsibility of constantly paying for food and school fees, which ideally should be the responsibility of the community of states through international cooperation.

Secondly, in the world we live in, multinational companies have become extremely powerful. This power is largely driven by the amount of capital they hold, the profit they make, and their use of lobbying power which continues to influence regulations and laws across the world. Multinationals shift the registration of their companies from one country to another to maximise profits. No country in the world is immune.[1] The accountants and lawyers, company directors and shareholders work to ensure this remains a possibility. Such behaviour only deepens inequality within the global North and destabilises states across the world. They are subsidising the continued existence of multinationals.

Thirdly, within the EU, companies’ taxpayer’s rights extend to the right to privacy. The application of human rights to non-human entities has resulted in an undermining of representative democracy in tax issues across the world. When global South countries ask for financial data on a company based in the EU, the company can argue that they have the right to privacy. The revenue agency as a result in the global South is unable to access the information to allow them to assess how much tax it may be missing out on.

Lastly, all decisions on collection and spending of state resources need to be sanctioned by the people for the people, with their full knowledge of human rights and access to information so that the main goal of raising living standards remains the central focus.

Since the early 2000s, international discussions about the global tax system have centered on which global entity – the OECD (controlled by rich nations) or the United Nations – is the principal forum to make and police global tax rules.

It is encouraging that international tax policy makers have, after much debate, included the term “human rights” in the terms of reference of the tax convention under negotiation. The European Union has always had a consistent position on ensuring that human rights are respected, but now in addition to the G77 nations, countries like Chile, Columbia, Saudi Arabia, India, and Ghana, are specifically pointing out that not only should human rights be included in these international tax policy conversations, but that they should be prioritised. Human rights must not only be a principle in tax treaties but could also be included in the preamble of such documents – and become an objective. It is very important that the ‘human rights language’ is embedded within fiscal spaces generally, but also within the tax convention itself.[2] This will be the first time that ‘rights requiring resources’ and ‘resources requiring rights’ will be recognised in tax documentation, something that the world has not had the appetite to do in over 40 years.

The challenge in the developing world is that human rights were always held over their heads as an issue they have failed to fulfil. However, the use of human rights in the tax and fiscal spaces opens a promising avenue. It allows states to use the argument of ‘limited resources’. In effect, this means the richer states that developing countries engage with in cross border activity are actually limiting their ability to realise rights because of the inequitable share of tax revenue. This is an argument that developing countries especially should embrace, own, and interpret to ensure levelling the playing field through the joint responsibility of states for the progressive realisation of human rights.

If human rights are not included as an objective or principle, then it is very likely that the push towards a more level playing field in a more equal world will not materialise. In addition, countries across the world will continue to struggle to achieve the Sustainable Development Goals, as the consistent roadblock remains of how to finance them, not just individually but as all countries together, sharing the common responsibility to help the most vulnerable in society.

So, what can be done? We should ensure that ‘human rights’ and or ‘raising living standards’ is a clear term found within all fiscal documentation – including the tax convention – and that it be placed as one of the cornerstones of the convention. Countries across the world, developed or developing, should ensure that human rights or the raising of living standards is part of the mandate they give their negotiators at the General Assembly. We should not only watch this process very carefully but should let governments know that human rights require financial resources and human resources require financing of rights.

The formal negotiation of a new tax convention is now underway following the historic vote at the UN General Assembly on 27 November 2024. With the backing of key nations, this framework convention promises to reshape the global tax landscape. There will be three meetings annually and the process is set to be completed by September 2027, which includes a framework convention and two protocols. The first early protocol topic is ‘cross border services in an increasingly global economy’, which must include all digital services and goods including automated digital services. This approach will build on existing work at the UN on Article 12B and widen to crucial issues for developing countries. The second protocol remains undecided as there was no consensus, but will need to be decided in the fifth session, probably in early 2025, which will set out procedure of the IGA; the views are split between high-net-worth individuals (HNWI) and illicit financial flows (IFF).

There is an absence of trust and legitimacy in the current international fiscal framework. With the historic vote at the UNGA and the formal start of negotiations for a global tax framework, there is an opportunity to create trust in a global tax system, and embed principles of fiscal legitimacy, transparency, accountability, responsibility, effectiveness, and efficiency in the process.[3] However, fairness and justice also need to be in focus to ensure fiscal legitimacy and a global fiscal contract.

[1] https://www.irishtimes.com/business/2024/06/13/eu-top-court-ruling-on-apple-tax-case-delayed-until-after-summer/

[2] Waris, Tax and Development 2013

[3] Waris, Financing Africa 2019

Attiya Waris
Attiya Waris was appointed the UN Independent Expert on foreign debt, other international financial obligations, and human rights by the Human Rights Council at its 47th session, and took up the function on 1 August 2021. She is the only Professor of Fiscal Law and Policy in Eastern and Central Africa. She holds a PhD in Law and is a specialist in Fiscal Law, Policy and Development. She is an advocate, company secretary and arbitrator of over 20 years standing and was the founding Chair, Fiscal Studies Committee from 2017-2020. She is an Observer to the UN Tax Committee. She teaches at the Law School, University of Nairobi, Kenya and has previously taught in South Africa, Rwanda, Malaysia and the United Kingdom. She has researched and published on global, African, Asian, European as well as Latin American issues.