UN must fight tax evasion, says rights expert

A UN rights expert has urged the world body to take action against the “systematic looting of society” in the form of tax avoidance and evasion.

by Tharanga Yakupitiyage

NEW YORK: A UN human rights expert has called on the international community to fight tax evasion and abolish tax havens that siphon off essential resources from human rights protection and global development.

“The United Nations must no longer tolerate the scandal of secrecy jurisdictions that facilitate tax evasion, corruption and money-laundering,” said the UN Independent Expert on the promotion of a democratic and equitable international order, Alfred de Zayas.

Secrecy jurisdictions are also known as tax havens.

De Zayas particularly pointed to the human costs of such actions, noting that trillions of dollars kept offshore to escape taxation take away necessary resources to combat extreme poverty and address climate change.

He described this “systematic looting of society” in a new report presented to the UN General Assembly.

The report states that up to $32 trillion is held in offshore secrecy jurisdictions around the world. According to the UN Conference on Trade and Development (UNCTAD), this costs developing countries more than $100 billion per year.

In 2011 alone, developing nations lost almost $950 billion due to illicit financial flows, including tax evasion. According to the Organization for Economic Cooperation and Development (OECD), this was seven times more than the official development assistance (the official term for aid) provided that year and substantially higher than the estimated costs of achieving the Millennium Development Goals.

Concern over financial secrecy and tax evasion was reignited in April 2016 when the International Consortium of Investigative Journalists (ICIJ) released the Panama Papers, which revealed how a single law firm in Panama aided thousands of prominent figures to create secretive offshore companies and use tax havens.

One of the revelations within the almost 12 million leaked documents concerns the case of the Heritage Oil and Gas Ltd Company. Panamanian law firm Mossack Fonseca allegedly helped the corporation to avoid paying $404 million in taxes in Uganda by relocating to the tax haven of Mauritius. For Uganda, which has poor health services and one of the highest rates of maternal deaths in the world, this amount represents more than the country’s annual health budget.

Mossack Fonseca have denied any wrongdoing.

The latest leak by ICIJ and media partners has exposed the use by politicians and others of over 175,000 offshore companies in the Bahamas. Among those named in the Bahamas Leaks is the European Union’s former Commissioner for Competition Neelie Kroes, who failed to declare her directorship of an offshore firm while in office.

In May, a group of 300 leading economists wrote to world leaders that there is no economic justification for tax havens and that offshore financial secrecy must end.

“This abusive global system needs to be brought to a rapid end. That is what is meant by good governance under the global commitment to sustainable development,” said Jeffrey Sachs, Director of Columbia University’s Earth Institute and special advisor to UN Secretary-General Ban Ki-moon.

Sachs and others highlighted the need for new global rules requiring companies to publicly report taxable activities in every country they operate.

Recommended measures

In addition to the need to increase transparency and accountability, de Zayas urged the UN General Assembly to take the lead by drafting a convention outlawing tax havens worldwide and establishing an intergovernmental tax body to draft and enforce measures not only to ensure multinational corporations pay their fair share of taxes, but also to prosecute perpetrators.

“Corruption, bribery, tax fraud and tax evasion have such grave effects on human dignity, human rights and human welfare that they shock the conscience of mankind. They should be prosecuted nationally and internationally,” he stated.

The Independent Expert also called for the protection of whistleblowers, who he said are often the most “effective” in shining a light on corruption.

“Whistleblowers, who should be considered as human rights defenders as they significantly contribute to a culture of transparency and accountability, 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,” he said.

De Zayas particularly looked to the newly selected UN Secretary-General Antonio Guterres for robust action, noting that he has a “unique opportunity” to fight against tax evasion and illicit financial flows and should thus convene a world conference on the issue.

Guterres will replace current Secretary-General Ban on 1 January 2017.

“I sincerely hope that the abolition of tax havens and the creation of a United Nations Tax Authority with a mandate to combat offshore tax avoidance and evasion, and to outlaw tax havens, will be among Mr. Guterres’ priorities,” de Zayas stated. (IPS)                              

Third World Economics, Issue No. 627, 16-31 October 2016, p11