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States should show link between corporate tax incentives & human rights implications, says UN Committee

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29 April 2016

Maximum Available Resources, Non-retrogression and Minimum Essential Levels in Tax Policy

Author: RightingFinance

This is the second in a series of advocacy tools produced by RightingFinance to assist education and dissemination of standards on tax policy and human rights contained in a report produced by the UN Special Rapporteur on Extreme Poverty and Human Rights...

In Liberia, extensive tax concessions to foreign investors involved in ore projects go far beyond the arrangements set out in the Liberia Revenue Code (LRC),to the point that the IMF recommended that if such concessions came up for renegotiation, the authorities should aim to harmonize the terms with the Revenue Code and avoid tax breaks...

[S]tates commonly justify granting incentives on the need to attract foreign investment. So, based on jurisprudence from the Committee on Economic, Social and Cultural Rights, in a case like that the state will have the burden of showing which human rights the investment meant to be attracted by the incentives will advance. It will also have to show that the incentive was the option least restrictive to economic, social and cultural rights.

Given evidence that the success of fiscal incentives to attract foreign investment is limited, the link between offered incentives and incoming investment cannot be lightly presumed. So the state will need to show that the investment would not have come absent the incentive and that the benefits from the investment outweigh its cost...

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29 April 2016

Second in series: Tax & Human Rights advocacy tool

Author: Global Alliance for tax Justice

...States also have an immediate obligation to ensure the satisfaction of, at the very least, minimum essential levels of economic, social and cultural rights.

A new publication by RightingFinance centers on the implications of such normative principles for tax policy...

...[A]lthough a state has discretion to use the tax measures that are best suited to its circumstances, it has the burden of demonstrating that in using its discretion to choose the most appropriate tax measure it is not violating principles such as progressive realization or maximum available resources.

Referring to states that fail to increase revenue through taxation, the report reminded that "the quality, accessibility and availability of goods and services needed for the realization of human rights, such as the rights to an adequate standard of living, health, education and social security, will hinge on the resources that the State is able to collect."

Economic and social rights also have implications for the use of corporate tax incentives. Tax incentives or tax holidays for corporations represent foregone public revenue in amounts frequently large, especially when compared with the human rights needs that could have been met with such revenue...

Other issues in the report that the advocacy tool addresses are taxes on the financial sector, natural resource taxes and standards for economic crises prevention and response.

A series of questions at the end invites reflection on a number of aspects to analyze when assessing human rights compliance in individual country cases...

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