Welcome to the United Nations 
OHCHR 
Statements Special Procedures
Statement by Alfred-Maurice de Zayas, Independent Expert on the promotion of a democratic and equitable international order at the 71st session of the General Assembly
20 October 2016
New York, 20 October 2016
Distinguished Chair,
Distinguished Delegates,
Trillions of dollars are necessary to deliver on the Sustainable Development Agenda and on COP21 commitments. More trillions will be necessary to tackle pandemics, natural and man-made disasters. Yet it is estimated that as much as thirty-two trillion dollars are held offshore in secrecy jurisdictions, escaping just taxation. Every year governments worldwide, developed and developing economies, lose huge sums of tax revenue through various schemes of tax avoidance and evasion, and hitherto most perpetrators have enjoyed impunity.
A human-rights-based-approach to taxation and stricter measures against tax fraud, tax evasion and tax havens are urgently needed, bearing in mind that a short-fall in tax revenues handicaps governments in meeting their human rights treaty obligations. As I outlined in my 2014 report to the Human Rights Council (A/HRC/27/51), one way of liberating funds for development is, of course, drastically reducing obscenely high military expenditures. Another way is by ensuring transparent and accountable fiscal and budgetary policies, so that individuals and corporations pay their fair share of taxes. Tax fraud by individuals and transnational corporations is not a gentleman’s peccadillo, but a crime that should be systematically prosecuted and punished. Taxes collected from tax evaders and funds confiscated from organized crime activities, drug trafficking, illicit arms trade, trade in endangered species, etc. should be redirected to human rights programmes. Illicit deposits by kleptocrats must be returned to the countries of origin. As elucidated in the report before you, a third source of revenue would be through the imposition of a financial transactions tax, which offers the additional advantage of curbing speculation and reducing the volatility of financial markets1.
For decades the General Assembly has been concerned with these issues, adopting since the early 1970’s pertinent resolutions on a new international economic order2. After the millennium summit the Assembly began addressing the promotion of a democratic and equitable international order, most recently in its Resolution 70/149 of 17 December 2015 affirming that “the responsibility for managing worldwide economic and social issues… must be shared among the nations of the world and should be exercised multilaterally.” The resolution underlines “the importance of a global and inclusive post-2015 development agenda for the promotion of a democratic and equitable international order….[and for] the establishment of a new international economic order based on equity, sovereign equality, interdependence, common interest and cooperation among all States”. My mandate is concerned because the achievement of a democratic and equitable international order requires significant changes in the current economic and financial regime, including just taxation worldwide.
Others experts are similarly concerned, including Jean Ziegler, member of the Advisory Committee of the Human Rights Council, who is preparing an in-depth report. Magdalena Sepulveda, the former Special Rapporteur on extreme poverty, also focused on taxation issues, and my colleague the Independent Expert on foreign debt, Juan Pablo Bohoslavsky, has elucidated the impact of illicit financial flows.
The United Nations General Assembly and the newly appointed Secretary-General of the Organization, António Guterres, have multiple challenges. I take this opportunity to encourage both to take concerted action against abuses by individuals, speculators, hedge funds and transnational enterprises who skirt taxes and loot governments. Indeed, corruption, bribery, tax fraud and tax evasion have grave effects on human dignity, human rights, and human welfare and must be prosecuted nationally and internationally, including by virtue of universal jurisdiction. I urge the General Assembly to consider convening a World Conference to establish a United Nations Tax body and draft a convention that would facilitate the phasing-out of tax-havens, reduce tax completion among States and declare so-called “sweetheart deals” to be a form of illegitimate subsidy contrary to international ordre public.
While the end of tax havenry is not in sight, governments are gradually coming to realize that it is in their own interest to phase-out secrecy jurisdictions. An international tax convention is necessary to make country by country reporting meaningful and ultimately to stop competition among tax jurisdictions and abolish secrecy. Transparency and a prohibition of harmful aggressive tax avoidance should be the two main components of the treaty.
Within the United Nations there is the Committee of Experts on International Cooperation in Tax Matters, which since 2012 the G77 and China have proposed be transformed into a global, inclusive norm-setting body for international tax cooperation at the intergovernmental level. This Committee of 27 experts has a consultative function, but it is not a rule-making body. The idea of a UN Tax body has been gaining momentum with lawyers, economists, civil society and numerous non-governmental organizations. In preparation for the Third UN Conference on Financing for Development held in Addis Ababa in July 2015, several civil society organizations called for the establishment of a UN global tax body3, as the most effective way to achieve an equitable global tax system, increase domestic resource mobilization and reduce intra-State and inter-State inequality4. While the new Platform on Tax Collaboration of the UN, IMF, World Bank, and OECD aims for greater cooperation, only a broad representativeness will allow deciding on global tax rules. The UN is the only organization that can provide a space for a global political discussion on tax competition and tax cooperation.
Allow me to focus on three serious challenges.
One is the collusion of banks, accounting firms and lawfirms in establishing phoney entities whose purpose is to hide wealth and avoid taxation. Another one is the need to promote transparency and accountability and provide protection to whistleblowers. Another is the need to adopt a binding treaty of corporate social responsibility.
Euphemisms constitute an obstacle to reform, because sub-consciously many politicians, legislators, businessmen, investors, transnational corporations, the press and even the public do not “feel” that certain business activities are toxic for the human rights of billions of human beings. Tax-manipulators are euphemistically referred to as “legal providers”.
“Tax havens” or “shelters” are really corruption ports. In the absence of specific criminal legislation, so-called “tax optimization” may be “legal”, but some forms are borderline with what otherwise would constitute tax fraud, racketeering, or conspiracy to defraud. How else can one judge the collusion of business lobbies, politicians, tax lawyers, banks, accounting and consulting firms in the creation of a thoroughly artificial system with special tax laws, “incentives” and loopholes that serve no economic or job-creating purpose but allow companies to cheat governments of tax revenue?
The Guiding Principles on Business and Human Rights do not contain any provision concerning the obligation of businesses to pay their fair share of taxes. There is no mention of tax evasion, tax fraud or tax havens. Maybe this obligation to pay taxes could be interpreted into the Guiding Principles under the rubric “due diligence”, but, of course, it would not be binding unless incorporated into a treaty.
Exploitation of loopholes directed by an organised tax avoidance industry dominated by four accounting firms and avidly copied by others is having disastrous impacts on human rights. “Accounting firms have set the standards to suit themselves… working in collusion with company executives to boost their rewards by hyping shareholder value at the expense of investment, social interests and long term survival”5. Not only does this behaviour illustrate a selfish approach to business driven by short-term profit, but most importantly it severely undermines democracy and the welfare of the people.
Whistleblowing is one of the most effective methods of shining light on corruption. Thanks to their revelations a public debate on tax havens has started that is providing momentum for legislative changes to abolish secrecy jurisdictions. But whistleblowers often pay a heavy price. It is in the spirit of a democratic and equitable international order to adopt legislation to protect whistleblowers and witnesses from reprisals and to provide them with easy-to-access avenues to make disclosures. As civil society has found, there are important shortcomings especially concerning the absence of anonymous channels for employees to discreetly report sensitive information6.
Because the tax activities of domestic and transnational corporations have significant direct and indirect socio-economic impacts, a binding legal instrument on corporate social responsibility7 should be adopted, stipulating the obligation to pay taxes where the profits are generated and a prohibiting corporations from shifting profits to secrecy jurisdictions. This would encourage responsible tax behaviour that does not harm global financial stability, development, and human rights.
There is an urgent need for a paradigm shift. While it is generally assumed that companies bring in foreign direct investments and create employment, this should not become a pretext to let them operate outside or even against any framework. It is not acceptable that companies invest faceless, make immense profit while forcing population displacement and do not subscribe to the most basic environment and human rights standards. This must cease.
Distinguished Chair,
Lawyers, economists, sociologists and other experts have delivered pertinent diagnoses. Bearing in mind how massively taxation impacts on the international order and human rights, I have formulated an action plan focusing on two main issues: greater financial transparency and robust actions to ensure multinational corporations pay their fair taxes.
Some elements of which follow:
States should
Establish an intergovernmental tax body under the auspices of the United Nations with the mandate to elaborate a United Nations Convention on Taxation and International Cooperation in Tax Matters.
Adopt a common UN standard of multilateral and automatic exchange of tax information.
Implement corporate tax and financial transparency, including public registries of ultimate beneficial ownership.
Ensure that all tax authorities are accountable not only to Parliaments but also to the public at large through a supervisory body consisting of a diversity of stakeholders.
Ensure that multinational corporations are treated as single entities conducting business across international borders and taxed in accordance with a unitary taxation system henceforth making all intra-group profit shifting impossible.
Stop the “race to the bottom” in corporate tax competition among States and ensure that so-called “sweetheart deals” are public and subject to democratic approval.
Conduct systematic human rights impact assessments to monitor the spill-over effects of their tax policies and agreements domestically and overseas. These should be periodic and independently verified.
Impose civil and criminal penalties on abusive tax practices, including the withdrawal of the operating licenses of auditing and accounting firms. Abolish tax amnesties.
Prohibit auditors from selling tax services to their audit clients.
Never award publicly-funded contracts to the designers and enablers of tax avoidance schemes.
Enact legislation to protect whistleblowers and witnesses, and ensure that individuals who want to share information about corporate tax practices which harm human rights are not prosecuted or subjected to reprisals; States should cease punishing individuals for disclosing information that the public has a right to receive pursuant to Article 19 ICCPR. A Charter on the rights of whistleblowers and a “protected disclosure defense” should be adopted, pursuant to which criminal or civil liability for protected disclosures is waved and an “authorized channel” is provided for such disclosures.
Introduce a financial transactions tax and enforce it.
Curb harmful corporate tax competition among countries, acknowledging that this policy facilitates corruption, bribery and money-laundering.
Ensure that all corporate tax returns and related documents are made publicly available. The details of all “sweetheart deals” must be public and subject scrutiny by elected Parliaments.
Audit banks, law-firms, accounting and consulting firms that specialize in establishing anonymous, shell- or mailbox-companies that serve no purpose other than to avoid taxes.
Parliaments should
Exercise their oversight functions concerning the human rights impacts of fiscal policies and the domestic and extraterritorial effects of tax havens.
The General Assembly should
Revise the Guiding Principles on Business and Human Rights8 and support the adoption of a legally binding instrument on corporate social responsibility prohibiting “aggressive tax avoidance”, tax fraud, tax evasion and tax havens.
Increase funding for the secretariat of the UN Committee of Expert on International Cooperation in Tax matters
Create a global database of bilateral trade in services analogos to its COMTRADE database on trade in goods targeting specific types of payments commonly used for shifting corporate profits
UNCTAD should
Develop a strategy to protect the policy space of States in controlling capital flows, in particular tocurb and criminalize illicit financial flows and the flight of moneys to taxhavens, in cooperation with the OHCHR and the UN Office on drugs and crime.
Draft accounting standards for taxation purposes, different from accounting standards for financial reporting, so as to remove opacity.
Civil Society should
Demand more direct democracy in matters such as taxation. They should demand participatory democracy and expose so-called “representative democracy” when it ceases to represent the voice of the people and becomes subservient to corporate lobbies.
Demand referenda on important issues, including a financial transactions tax, the outlawing of tax havens and run-away military expenditures.
Law Schools and Business Schools should
Include ethics and corporate social responsibility as obligatory disciplines in their curricula. Bar Associations should test candidates thereon. The legal profession must not be silent when members of the bar seriously undermine social policies by creating phony companies and other schemes for tax avoidance purposes.
Instil a sense of responsibility on students as prospective lawyers and business executives. They must be taught that they have a duty to serve society and to promote human rights. Teaching “aggressive tax avoidance” is unethical. Students must understand the difference between legitimate profit and looting of society.
Distinguished Delegates,
A democratic and equitable international order as envisaged in the United Nations Charter requires international solidarity to achieve sustainable development and human rights for all. I call upon this august Assembly to convene a World Conference under the auspices of the United Nations Conference on Trade and Development with a mandate to outlaw tax havens and establish a global, inclusive norm-setting body for international tax cooperation at the intergovernmental level.
Finally, as I have done in all my reports, I reiterate my sincere appreciation of the very hard-working and competent staff of the Office of the High Commissioner for Human Rights. I urge the General Assembly to allocate greater resources to the Office of the High Commissioner, in particular to the Special Procedures of the Human Rights Council, and to the United Nations Conference on Trade and Development.
I thank you.
Notes:
1. http://www.un.org/en/development/desa/news/policy/wess2012.html
2. A/RES/S-6/3201; A/RES/63/224; amongst others
4. http://www.globaltaxjustice.org/the-world-needs-a-un-global-tax-body-now/
5. Austin Mitchell, Prem Sikka, The Pin-Stripe Mafia: How Accountancy Firms Destroy Societies, 2011. Jim Cousins, Austin Mitchell, Prem Sikka, “Race to the Bottom: The case of the accountancy firms”, 2004.
7. A/HRC/RES/26/9
8. http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf