The Global Week of Action for Tax Justice took place on the third week of June 2015, resulting in the Lima Declaration on Tax Justice and Human Rights. More than 100 organizations around the world, including the Egyptian Center for Economic and Social Rights (ECESR), ratified the declaration that demands deep amendments on tax policies in adherence to the human rights standards and principles.
The declaration emerged during the International Tax Justice and Human Rights Conference. The conference was held early 2015 by various international organizations, including ECESR, in the Peruvian capital Lima. The declaration calls for prioritizing tax justice and related human rights issues in the national and international economic and development policies.
The Egyptian Government tax policy is heading towards increasing the burdens of middle and low income citizens rather than bringing social justice through progressive tax regimes. This is evident in depending on consumer taxes that weakens the ability of everyday citizen to enjoy basic goods and services because levying taxes increase their prices.
Thus, the government is working on introducing the value added tax (VAT) based on the recommendation of the International Monetary Fund (IMF) and organizations such as the European Union (EU) because it makes increasing tax income easier. The government decided to introduce VAT without considering its effects, which includes increasing poverty rates that is already increasing in the last ten years. The government also revoked all previous decisions regarding levying tax burdens on the rich and the corporations according to their revenues, saying that attracting investment and encouraging investors is the top priority of the tax policy. They also ignored that tax facilities are public policy tools used to attract specific investments the economy needs, not a general rule. Otherwise, what would be the difference between useful investment and investment that produces profits without benefiting the Egyptian economy?
The Egyptian government, that always reiterated adherence to progressive and just tax regimes in which higher earners contribute according to their income, ignored these principles in favor of investors and businessmen. This year, the government unified income taxes up to 22.5%, down from 25% on the highest earners. They also cancelled the temporary 5% increase that was called wealth tax and applied to those earning more than a million pounds annually. This effectively means that the government decreased the tax rate on the highest earners from 30% to 22.5%, the biggest tax rate cut that ever happened in Egypt. This cut applies only to the highest earners, which constitutes a clear breach of the progressiveness and tax justice principles.
The government also cancelled a 10% tax on stock exchange profits, giving in to the private interests of investors and businessmen who objected to the first ever capital profit tax and claimed it will affect their businesses and investment opportunities in Egypt. The government decided to abide by the requests of the investors, which means interest networks deeply infiltrate decision making within the Egyptian government.
In light of this regressive policy, we do not expect any material increase in state budget revenue in FY 2015-2016 that started last week. On the other hand, Egypt will go on depending on debt and austerity measures in order to control the budget deficit.
This declaration focuses specifically on the importance of tax justice as a sustainable tool for providing human rights warrants. The declaration described the international corporate tax regime as obsolete, because it favors the interests of multinational corporations (MNCs) and international finance entities. The declaration also condemned the unjust financial policies that many countries apply, which in turn endanger the economic and social rights of individuals, especially the most vulnerable. These policies does not bear in mind the individual ability to pay, but rather concentrates on offering socially useless tax incentives to alleviate the burden on the rich and corporates. These incentives harm the smallest income brackets, which is against human rights, equality and non-discrimination principles.
Believing that principles of equality and non-discrimination are essential for social justice, and that policies are meant primarily to act as public policies that redistribute resources in ways that prevent discrimination, ECESR supports the declaration and calls on the Egyptian government to change their tax policies that are still burdening the actual taxpayers in order to prevent the efforts of spreading out the tax base to include all income and profit earners, especially the capital market profit tax that the Egyptian government recently cancelled.
Thus, we support the declaration issued during the Lima convention that calls on the United Nations to establish a global tax body to review tax laws around the world. This effort would help countries establish human rights, push countries to install legal and organizational frameworks to safeguard against the dangers of corporate tax behavior on human rights, and instigate international financial institutions to prioritize the commitments of governments towards human rights whenever they provide consultations regarding taxation and financial policies.
LIMA DECLARATION ON TAX JUSTICE AND HUMAN RIGHTS
We come together as a broad-based community of experienced advocates, practitioners, activists, scholars, jurists, litigators and others committed to advancing tax justice through human rights, and to realizing human rights through just tax policy.
Tax revenue is the most important, the most reliable and the most sustainable instrument to resource human rights in sufficient, equitable and accountable ways. The realization of all human rights, likewise, is a core raison d’être of government. It is through respecting, protecting and fulfilling civil, political, economic, social, cultural and environmental rights that the state earns its legitimacy to tax. Taxation also plays a fundamental role in redistributing resources in ways that can prevent and redress gender, economic and other inequalities and reduce the disparities in human rights enjoyment that flow from them. Moreover, a just system of taxation can cement the bonds of accountability between the state and its people, fostering governments to be more responsive to the rights and claims of those to whom they are answerable. Tax policies can likewise counteract glaring market failures and protect global common goods – not least a healthy environment within planetary boundaries.
Yet many countries struggle to collect sufficient tax revenue to adequately fund the realization of human rights, all of which come with some financial cost. In parallel, unjust tax systems at the national and global levels continue to fuel rising inequality and widening disparities in human rights enjoyment, shifting the burden of financing public services onto society´s least well-off, weakening the provision of existing services and concentrating wealth in the hands of a privileged few. Regressive fiscal policies being pursued in many countries across the globe from North to South have posed a serious threat to the economic and social rights of already disadvantaged groups. This basic injustice is fuelling deeper economic, gender, and political inequalities, eroding trust in government institutions, which are perceived as more accountable to transnational economic elites than to their own people.
Tax policy is public policy, and so can no longer be treated as a matter of mere technical engineering or be left entirely to the unaccountable discretion of government. Instead, we call on governments to cultivate transformative social and fiscal compacts, and empower citizen watchdog institutions that have the purpose of subjecting tax policy to the most rigorous standards of transparency, public participation, and meaningful accountability in line with internationally-recognized human rights principles.
Existing human rights standards provide a normative justification for a capable and well-resourced state. In order to comply with their obligations to protect and progressively realise economic and social rights, states must use and generate the maximum available resources (especially through sufficient and sustainable taxation) in equitable, non-discriminatory ways.
Tax laws, policies and practices must work to end structural discrimination rather than entrench growing inequalities of all kinds, including gender, ethnic, and economic disparities. Indeed, taxation is a key instrument for addressing discrimination against women and ensuring their substantive equality. Regressive revenue-raising measures (including those which effectively impose a disproportionate fiscal burden on the most disadvantaged within and between households and disregard individual ability to pay) as well as socially-useless tax incentives and relief for business and the wealthy that have the effect of shifting the tax burden to those less able to pay while relieving those more able to pay, are inconsistent with the human rights principles of non-discrimination and equality. We call on governments to conduct impact assessments of the human rights and equality implications of tax laws. Likewise, we urge governments and statistical agencies to collect individual, household, and corporate data that enables decision-makers to accurately evaluate the human rights and equality impacts of all fiscal policies.
Today’s international corporate tax system – put in place when the nature and composition of the global economy was fundamentally different – is thoroughly outdated, privileging the interests of multinational corporate groups, global financial interests and some advanced economies while preventing national governments from raising sufficient revenue in non-discriminatory and accountable ways. Rigorous, evidence-based scrutiny of the impacts tax laws, policies and practices have on human rights and equality abroad should replace the all-too-often unsubstantiated assumptions about the economic benefits of maintaining the prevailing international tax system. Grounded on states’ existing legal duties to take steps individually and through international cooperation and assistance to achieve the full realization of human rights, we call for the rewriting of global tax rules under the auspices of a legitimate, fully inclusive and democratic United Nations global tax body.
A state implementing tax policies or practices that erode the capacity of other states to resource human rights (whether by means of preferential tax rulings, preferential corporate tax regimes for internationally mobile forms of capital, or any other means) may be in violation of this international legal duty to cooperate. Further, states which purposefully obstruct tax information exchange, as well as banks and law firms that exploit secrecy arrangements to the detriment of the public purse, are forseeably depriving other states of the resources needed to meet their human rights obligations. We therefore call on states to conduct human rights impact assessments of the spill-over effects of their tax policies on other countries, to take immediate action to halt any harmful practices, and to provide effective remedy where harm is done. Likewise, we call on states to enact legislation to regulate transfer pricing mis-practices, and to curtail financial and banking secrecy so as to enable governments to effectively combat tax abuse.
Business behaviour—and tax advice—that place tax revenues at risk may well deprive states of the resources they need to realise human rights. Therefore, the tax behaviour of business can no longer be treated outside the purview of the corporate responsibility to respect human rights. In order to implement their obligations in accordance with the United Nations Guiding Principles on Business and Human Rights, we call on governments to develop legal and regulatory frameworks which safeguard against the human rights risks of business tax behaviour. We also call on governments to provide effective remedy for any harmful conduct stemming from tax behaviour. In parallel, we urge companies and corporate groups to assess and address corporate tax abuse, for example in their policy statements, due diligence and grievance processes. Starting from a clear recognition of the adverse human rights impacts of tax abuse, companies should then conduct their tax arrangements in transparent and accountable ways so as to not jeopardize government revenue collection, even when such arrangements are technically lawful yet contravene human rights principles. We especially call on suppliers of schemes which may put government revenues at risk (in particular tax lawyers, accountants and financial intermediaries) to avoid colluding in tax abuse, to recognize their particular human rights responsibilities, to conduct human right due diligence, and to redress any harmful activities. Further, we call on companies of all stripes to refrain from interfering in the public interest of tax policy-making, be that directly through special-interest lobbying or indirectly through provoking tax competition.
We call on international institutions to support the reform of the broken global tax system by, amongst other things, integrating human rights standards into how they address corporate tax avoidance and the adverse spill-over effects of certain governments’ tax policies. Likewise, international financial institutions which advise governments on their tax and fiscal policies should, above all, respect those governments’ human rights obligations.
Rather than an obstacle, the law should be transformed into an instrument of tax and fiscal justice. We urge the legal profession (including human rights and tax lawyers, judges and the judiciary at large) to consider its particular responsibilities to oppose unjust tax policies that impede the realization of human rights.
One of the human rights community’s most urgent challenges is to ensure states are accountable for equipping themselves with the material means for the fulfilment of human rights. We therefore call on the human rights community at large (e.g. advocates, lawyers, academia, women’s rights organizations, NGOs, trade unions, national human rights institutions, treaty bodies and regional commissions) to actively examine how tax practices affect their missions, and develop capacities and practices to advance human rights through closer monitoring and review of tax policy. Whistleblowers and other tax justice advocates who work in the public interest to expose blatant tax-related human rights abuses, meanwhile, should be considered human rights defenders, and protected accordingly.
Finally, we call on the tax justice and development communities at large to integrate human rights into their research and advocacy, so as to harness the power of invoking human rights discourse, norms and accountability mechanisms in the pursuit of just taxation and sustainable development.
The under-signed organizations and individuals endorse this Lima Declaration on Tax Justice and Human Rights, and pledge to continue collaborating to advance tax and fiscal justice through human rights.
 The Lima Declaration emerges from the international strategy meeting, “Advancing Tax Justice through Human Rights,” held in Lima, Peru in 2015, convened by the Center for Economic and Social Rights, the Global Alliance for Tax Justice, Oxfam, Red Latinoamericana sobre Deuda, Desarrollo y Derechos (LatinDADD), Red de Justicia Fiscal de América Latina y el Caribe and the Tax Justice Network.