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15 Dec 2015

Troels Boerrild, ActionAid Denmark; Ewan Livingston, ActionAid UK; Matti Kohonen, Christian Aid; & Radhika Sarin, Oxfam

It's time for companies to bring tax into their human rights due diligence

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ActionAid, Christian Aid and Oxfam, as well as other NGOs, think tanks, legal commentators, the former UN Special Rapporteur on Extreme Poverty and Human Rights and many others have proposed that tax behaviour should no longer be treated in isolation from companies’ other commitments to sustainable development under, for example, the United Nations Global Compact initiative.

Nor, the argument goes, should tax practices remain outside the “corporate responsibility to respect human rights” outlined in the UN Guiding Principles for Business and Human Rights (UNGPs).

This means that companies are increasingly expected to manage their tax arrangements in a manner which respects human rights principles, even where it means abandoning or rejecting tax arrangements or practices that are technically lawful.

 Companies are increasingly expected to manage their tax arrangements in a manner which respects human rights principles

We have published a paper, Getting to Good - Towards Responsible Corporate Tax Behaviour, to promote further discussion and action in this area. 

In it, we discuss tax as a business and human rights issue and outline a range of propositions and example behaviours that companies can undertake on their journey towards responsible corporate tax behaviour. The propositions and examples fall within eight key issue areas: 1) tax planning practices; 2) public transparency and reporting; 3) non-public disclosure; 4) relationships with tax authorities; 5) tax function management and governance; 6) impact evaluation of tax policy and practice; 7) tax lobbying/advocacy and 8) tax incentives.

While our proposal for companies to do impact assessments of their tax behaviour is the one that draws most directly from the UNGPs, we would argue that companies’ behaviour across all eight issue areas of tax-responsibility has direct and knock-on effects on the rights of women, men and children, particularly in developing countries.

Most existing proposals for responsible tax practice conceptualise and measure the impact of corporate tax avoidance in terms of money lost to the public purse and, as a result, the limits on governments’ ability to uphold the human rights of their citizens.

The impact on the public purse is indeed a core consideration, since it is vital for governments to collect tax revenue to fund essential public services to fulfil rights such as healthcare and education. But tax-driven corporate decision-making can also impact human rights and in a more direct way.

For example:

  • A company hopping from jurisdiction to jurisdiction to chase a string of discretionary tax holidays is less likely to invest in local infrastructures and economies and less likely to create good quality, highly skilled jobs than a company making more stable, non-tax-motivated decisions about its business operations.
  • A company’s decision to use tax-motivated debt financing to artificially depress the profits of a particular subsidiary could result in reduced wages or job losses - and adversely affect local minority shareholders as a result of reduced distributable reserves.
  • Company tax lobbying that is done in a non-transparent and unaccountable manner undermines the integrity and good governance of public tax systems and countries at large and is harmful to all other taxpayers and actors.

These examples demonstrate that a company that is serious about being tax-responsible needs a system for assessing the impact of a given tax-driven decision on tax revenues, broader socio-economic effects and the human rights of workers and citizens. The principle is no different from a company knowing and showing that it respects human rights in its supply chains in terms of responsible procurement and core business operations.

In practice, the establishment of such impact assessment procedures and systems is in its infancy, in almost every area of human rights due diligence. Designing and implementing such systems will be a challenging but important journey for tax-responsible companies and will require a great deal of innovative work. In part, such systems may draw upon tax functions’ existing practices for assessing the impact of business decisions on tax liabilities – though these are currently orientated towards assessing reductions or increases in tax costs.

As challenging as the journey will be, it’s time to place tax management squarely at the heart of responsible and truly sustainable business. Human rights due diligence that also considers corporate tax behaviour will allow companies to make decisions on a more informed and sustainable basis.

Beyond the business community, we hope that the content of our paper will inspire and be of use to organisations that design and implement benchmarks to recognise and incentivise good corporate behaviour. The paper may be of particular interest to the investors and civil society groups, including the Business and Human Rights Resource Centre, which are collaborating to develop the Corporate Human Rights Benchmark. We must work together to drive a ‘corporate race to the top’, including on responsible corporate tax behaviour.


The authors of Getting to Good – Towards Responsible Corporate Tax Behaviour are Troels Boerrild, ActionAid Denmark; Matti Kohonen, Christian Aid; Radhika Sarin, Oxfam; Kerry Stares, formerly, ActionAid UK and Mike Lewis, an independent researcher.