Info Service on Finance and Development (Oct16/06)
17 October 2016
Third World Network
New UNSG urged to hold global meet on tax havens
Published in SUNS #8333 dated 14 October 2016
Geneva, 13 Oct (Kanaga Raja) -- A United Nations human rights expert
has called on newly elected United Nations Secretary-General (UNSG)
Antonio Guterres to convene a world conference to discuss the issues
of tax avoidance and evasion, the abolition of tax havens as well
as the protection of whistleblowers.
In a UN news release, the Independent Expert on the promotion of a
democratic and equitable international order, Mr Alfred de Zayas (United
States), said: "The choice of Mr Guterres as the next UN Secretary-General
offers a unique opportunity to advance the fight against tax evasion
and illicit financial flows, at a moment where the world is paying
increasing attention to these crucial issues".
"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."
"Trillions of dollars necessary for combatting extreme poverty
and addressing climate change are being kept offshore, thus escaping
just taxation and effectively stealing hundreds of billions of dollars
each year from the public treasuries," the rights expert said.
Mr De Zayas pointed out that widespread tax avoidance, tax evasion,
tax fraud and profit-shifting, facilitated by bank secrecy and a web
of shell companies registered in tax havens, are now routinely documented,
but their true human cost is only revealed progressively.
Noting that an increasing number of human rights experts are reporting
on the issue, Mr De Zayas highlighted the need to put the issue of
taxation on the agenda of the General Assembly and of the Human Rights
Council, in particular through the Universal Periodic Review and the
2016 Forum on Human Rights, Democracy and the Rule of Law.
"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 said.
"The United Nations must take concerted action against abuses
and crimes perpetrated by individuals, speculators, hedge funds and
transnational enterprises who skirt taxes and loot governments."
In particular, the rights expert urged the UN General Assembly to
draft a convention to outlaw tax havens worldwide, declare so-called
‘sweetheart deals' (of countries/governments) with transnational corporations
such as Apple, Google and Starbucks to be contrary to international
Mr De Zayas also stressed the need for effective protection of whistleblowers.
"Whistleblowing is one of the most effective methods of shining
light on corruption. Thanks to the revelations of the Panama Papers,
Bahamas Papers, Luxleaks and the UNAOIL scandal, a public debate on
corruption, bribery and tax havens has started that is providing momentum
for legislative changes to abolish secrecy jurisdictions," he
But 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, he noted.
"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," said Mr De Zayas.
According to the news release, the Independent Expert will be convening
on 14 October an expert consultation, at which "strategies will
be discussed, including the mainstreaming of human rights into the
activities of the World Bank and International Monetary Fund, which
should henceforth refuse funding to any project or country that participates
in or allows illicit financial flows into tax havens".
Meanwhile, in his latest report to the General Assembly (A/71/286)
on the human rights impact of tax avoidance, tax evasion, tax fraud
and profit-shifting, Mr De Zayas said that a human rights-based approach
to taxation and stricter measures against tax fraud, tax evasion and
tax havens are urgently needed because a shortfall in tax revenues
handicaps Governments in meeting human rights treaty obligations.
The Independent Expert pointed to "white-collar criminality"
that has enjoyed a high level of anonymity and impunity. Indeed, it
is the infrastructure of intermediaries, including tax advisers, law
firms, accountants and trust service providers, that facilitates tax
evasion and avoidance as well as cross-border illicit financial flows.
Every strategy to tackle the intermediaries, euphemistically called
"enablers" or "service providers", must be part
of the effort to tackle tax evasion, said Mr De Zayas.
Part of the problem lies in the mantras of market fundamentalism and
the belief that financial markets should be deregulated because this
ultimately benefits everyone, including the poor. Although no empirical
evidence exists to back this up, transnational corporations and the
super-rich have succeeded in creating an enabling environment for
systematic looting of society.
"Collusion between the world's biggest banks, specialized law
firms, and consulting and accounting firms has led to a global system
designed to hide money and avoid taxes by virtue of secretive offshore
structures. This is unethical, and should be perceived as such by
professional associations, law schools and business schools,"
Yet, instead of prohibiting activities that are clearly contra bonos
mores and may amount to conspiracy, or even a form of racketeering,
States have entered into a kind of self-destructive competition among
themselves to see which jurisdiction offers greater secrecy facilities.
"The situation has been a bonanza for lawyers and accounting
firms and become toxic to the fiscal health of many countries, particularly
since financial globalization expanded in the 1980s and 1990s. The
offshore world corrupts and distorts markets and investments, shaping
them in ways that have nothing to do with efficiency," said Mr
Whistle-blowing is one of the most effective methods of shining a
light on corruption. Thanks to the revelations of whistle-blowers
a public debate on tax havens has started that is providing momentum
for legislative changes to abolish secrecy jurisdictions.
But whistle-blowers often pay a heavy price. It is in the spirit of
a democratic and equitable international order to adopt legislation
to protect whistle-blowers and witnesses from reprisals and to provide
them with easy-to-access avenues to make disclosures.
According to Tax Justice Network, there are over 100 "secrecy
jurisdictions", a term preferred over tax havens for which there
is no definition based on objectively verifiable criteria.
The Network's global analysis reveals that there is a spectrum of
financial secrecy in most jurisdictions assessed and that what is
needed is a reform of the system, rather than looking for "unproblematic"
Also according to Tax Justice Network, an estimated $21-$32 trillion
of private financial wealth is located offshore, untaxed or lightly
taxed, in secrecy jurisdictions around the world.
Estimated revenue losses are on the order of $190 billion annually.
According to the UN Conference on Trade and Development (UNCTAD),
this costs developing countries more than $100 billion annually.
The Tax Justice Network Financial Secrecy Index ranks jurisdictions
according to their secrecy and the scale of their offshore financial
The top three jurisdictions listed in the 2015 index were Switzerland,
Hong Kong-China, and the United States.
Other high-profile jurisdictions include the United Kingdom of Great
Britain and Northern Ireland and its Overseas Territories and Crown
Dependencies, Luxembourg, the Netherlands, Belgium, Malta, Cyprus,
Singapore, Liberia and Panama.
According to Tax Justice Network, illicit cross-border financial flows
have been estimated at $1.6 trillion per year, dwarfing the $135 billion
devoted globally to "foreign aid".
It is estimated that since the 1970s African countries alone have
lost over $1 trillion in capital flight, while combined external debts
are less than $200 billion.
"Viewed from this perspective, Africa is a major creditor to
the world, but its assets are in the hands of a wealthy elite, protected
by offshore secrecy, while the debts are shouldered by populations
already suffering from extreme poverty," said the Independent
According to OECD, the artificial schemes of base erosion and profit-shifting
result in global corporate income tax revenue losses of $100-$240
According to Oxfam, United States corporations hide at least $1.3
trillion in tax havens, and profit-shifting by US multinationals suggests
that about 25-30 per cent of global profits are shifted into jurisdictions
with no corresponding real economic activity.
"Because the tax activities of domestic and transnational corporations
have significant direct and indirect socio-economic impacts, a binding
legal instrument on corporate social responsibility stipulating the
obligation to pay taxes where the profits are generated and a prohibition
on shifting profits should be adopted."
According to the rights expert, this would encourage responsible tax
behaviour that does not harm global financial stability, development
and human rights.
Taxation should be used to advance human rights. Fiscal and budgetary
policy should be reformed with a view to achieving fair taxation by
abolishing tax havens and "sweetheart" deals, closing loopholes
and rejecting contra bonos mores schemes and abuse of rights.
Progressive redistributive taxation polices will produce funding for
vital public services that will reduce inequality and poverty and
lead to sustainable development, said Mr De Zayas.
In his report, the Independent Expert called on States to 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.
States should also adopt a common United Nations standard for multilateral
and automatic exchange of tax information, and implement corporate
tax and financial transparency, including public registries of ultimate
In addition, States should enact legislation to protect whistle-blowers
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 of the
International Covenant on Civil and Political Rights."
Furthermore, a charter on the rights of whistle-blowers and a "protected
disclosure defence" should be adopted, pursuant to which criminal
or civil liability for protected disclosures is waived and an "authorized
channel" is provided for such disclosures.
The Independent Expert called on the General Assembly to revise the
Guiding Principles on Business and Human Rights and support the adoption
of a legally binding instrument on corporate social responsibility
prohibiting "aggressive tax avoidance", tax fraud, tax evasion
and tax havens.
He said UNCTAD should develop a strategy to protect the policy space
of States in controlling capital flows, in particular to curb and
criminalize illicit financial flows and the flight of money to tax
havens, in cooperation with the Office of the United Nations High
Commissioner for Human Rights and the United Nations Office on Drugs
The International Monetary Fund, the World Bank and central banks
should refuse loans to countries that harbour tax havens.
"No project should be subsidized if the enterprises involved
use secrecy jurisdictions," said Mr De Zayas. +