Nick Shaxson ■ UN calls UK to account over impact of unjust tax laws
A United Nations body has called on the single largest financial secrecy jurisdiction in the world – the United Kingdom and its Overseas Territories and Crown Dependencies – to account for the human rights impacts of its unjust tax policies at home and abroad.
The call was issued by the UN Committee on Economic, Social and Cultural Rights, which oversees compliance with the International Covenant on Economic, Social and Cultural Rights. 
Drawing on a joint report by the Center for Economic and Social Rights (CESR), the Tax Justice Network (TJN) and the Global Justice Clinic at NYU School of Law (GJC), the Committee voiced concerns that the UK’s financial secrecy legislation and permissive rules on corporate tax are undermining the proper resourcing of human rights, thereby affecting the ability of other States to mobilize resources for the implementation of economic, social and cultural rights.
The Committee echoed the joint report’s observation that the UK’s financial network is draining resources that would otherwise be available to finance human rights, such as health, education, access to justice and social protection. Therefore, the Committee called on the UK government to conduct a human rights impact assessment of its financial secrecy and corporate tax and reporting policies, to “take strict measures to tackle tax abuse, in particular by corporations and high-net-worth individuals” and to “intensify its efforts, in coordination with its Overseas Territories and Crown Dependencies, to address global tax abuse”.
“The Committee’s intervention is extremely timely,” said Niko Lusiani, Director of CESR’s Human Rights in Economic Policy program. “Tax abuse presents an ever-increasing threat to all human rights, and is driving historic levels of socioeconomic inequality both within and among countries.” To comply with the Committee’s recommendations, Niko urged, “the UK government should take immediate steps to ensure that its financial and tax laws do not undermine the human rights of its own citizens or the citizens of other countries.”
This first review of the UK since 2009 provided the Committee with a unique opportunity to scrutinize the austerity budgets implemented by successive governments in recent years. Alongside the concerns over financial secrecy, the Committee strongly criticized other areas of UK tax and fiscal policy that it considers adverse to human rights, including recent increases to value added tax (VAT) and the new limit on inheritance tax, both of which further exacerbate inequality.
As explained in the CESR-TJN-GJC report, the exploitation of legal loopholes and arbitrage between national tax authorities—facilitated by the UK and other secrecy jurisdictions—results in the siphoning off of vast flows of revenue, especially from the economies of less-developed countries. The foreseeable result of this conduct is the enrichment of already wealthy individuals and corporations at the expense of low and middle-income households. The need for corrective measures by the UK is greater now than ever.
According to Liz Nelson, Director at Tax Justice Network, “The UK’s referendum heralds increased dangers for human rights. The vote for Brexit has reinvigorated the offshore industry and London’s financial hub, increasing the likelihood of more unregulated flows of dirty money.” She explained, “The government has the power and the duty to close existing legal loopholes, by introducing public registries of company and trust beneficial ownership in the UK and Overseas Territories and Crown Dependencies.”
As the report details, the International Monetary Fund reports that developing countries lose $212 billion each year to just one form of tax abuse – base erosion – through which multinational corporations shift profits across their global affiliates in order to lower their tax bills, while the offshoring of private wealth leads to annual revenue losses of $190-$280 billion worldwide.
“By facilitating tax abuse, the UK is shirking its legal obligations to respect and protect human rights,” said Nikki Reisch, Legal Director at the Global Justice Clinic. “As a party to the International Covenant on Economic, Social and Cultural Rights, the UN Charter, and other international agreements, the UK has committed to cooperate internationally to create an enabling environment for the fulfillment of economic, social and cultural rights. Its current conduct flies in the face of those commitments.”
The UK’s appearance before the Committee follows on the heels of another pioneering effort to hold tax havens to account. In response to a groundbreaking submission by CESR, GJC, Tax Justice Network and Berne Declaration, the UN’s principal women’s rights body – the Committee on the Elimination of Discrimination against Women – called on Switzerland to account for the impacts of its financial secrecy and corporate tax policies on women’s rights and gender equality, especially in low and middle-income countries. These initiatives by UN treaty bodies to scrutinize the tax policies and practices of member states illustrate the important role of human rights norms, principles and institutions in reshaping the international tax regime.
Related links:
- CESR, TJN, GJC-NYU, UK Responsibility for the Impacts of Cross-border Tax Abuse on Economic, Social and Cultural Rights
- Committee on Economic, Social and Cultural Rights, Concluding observations on the sixth periodic report of the United Kingdom of Great Britain and Northern Ireland
- Switzerland: State Responsibility for the Impacts of Cross-border Tax Abuse on Women’s Rights & Gender Equality
- CESR, ‘Human Rights in Tax Policy’ webpage
- Tax Justice Network human rights webpage
The author
Related articles
The Tax Justice Network’s most read pieces of 2024
Stolen Futures: Our new report on tax justice and the Right to Education
Stolen futures: the impacts of tax injustice on the Right to Education
31 October 2024
CERD submission: Racialised impacts of UK’s ‘second empire’
UN submission sets out racist impacts of UK’s ‘second empire’
Infographic: The extreme wealth of the superrich is making our economies insecure
Wiki: How to tax the superrich (with pictures)
Taxing extreme wealth: what countries around the world could gain from progressive wealth taxes
19 August 2024
A Call for Climate and Social Justice: Why Europe Needs a Wealth Tax
I did add a comment, in fact more than one. The concept of taxation, let alone its practice is totally unjustified. When a nation needs to raise money for public use, it should do so from the way that its social laws control the opportunities to work and to reside. Land is a common necessity for both of these activities, yet in most places the ownership of land and its restriction for free use, causes the nation to seek taxation of the produce as the means for meeting its needs. If the tax were to be taken from the land and not from the people who produce and consume the goods or produce, then there would be greater social justice because the speculation in land values would cease. This is called Land Value Taxation and it was first suggested 137 years ago by Henry George. In “Progress and Poverty” 1879, Henry George proposed a single tax on land values without other kinds of tax on produce, services, capital gains etc. This regime of land value tax (LVT) has 17 features which benefit almost everyone in the economy, except for landlords and banks, who/which do nothing productive and find that land dominance has its own reward.
17 Aspects of LVT Affecting Government, Land Owners, Communities and Ethics
Four Aspects for Government:
1. LVT, adds to the national income as do other taxation systems, but it replaces them.
2. The cost of collecting the LVT is less than for all of the production-related taxes–tax avoidance becomes impossible because the sites are visible to all.
3. Consumers pay less for their purchases due to lower production costs (see below). This creates greater satisfaction with the management of national affairs.
4. The national economy stabilizes—it no longer experiences the 18 year business boom/bust cycle, due to periodic speculation in land values (see below).
Six Aspects Affecting Land Owners:
5. LVT is progressive–owners of the most potentially productive sites pay the most tax.
6. The land owner pays his LVT regardless of how his site is used. A large proportion of the ground-rent from tenants becomes the LVT, with the result that land has less sales-value but a significant “rental”-value (even when it is not used).
7. LVT stops speculation in land prices and the withholding of land from proper use is not worthwhile.
8. The introduction of LVT initially reduces the sales price of sites, even though their rental value can still grow over a longer term. As more sites become available, the competition for them is less fierce.
9. With LVT, land owners are unable to pass the tax on to their tenants as rent hikes, due to the reduced competition for access to the additional sites that come into use.
10. With LVT, land prices will initially drop. Speculators in land values will want to foreclose on their mortgages and withdraw their money for reinvestment. Therefore LVT should be introduced gradually, to allow these speculators sufficient time to transfer their money to company-shares etc., and simultaneously to meet the increased demand for produce (see below).
Three Aspects Regarding Communities:
11. With LVT, there is an incentive to use land for production or residence, rather than it being unused.
12. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper too, because entrepreneurs have less difficulty in starting-up their businesses and because they pay less ground-rent–demand grows, unemployment decreases.
13. Investment money is withdrawn from land and placed in durable capital goods. This means more advances in technology and cheaper goods too.
Four Aspects About Ethics:
14. The collection of taxes from productive effort and commerce is socially unjust. LVT replaces this extortion by gathering the surplus rental income, which comes without any exertion from the land owner or by the banks– LVT is a natural system of national income-gathering.
15. Bribery and corruption on information about land cease. Before, this was due to the leaking of news of municipal plans for housing and industrial development, causing shock-waves in local land prices (and municipal workers’ and lawyers’ bank balances).
16. The improved use of the more central land reduces the environmental damage due to a) unused sites being dumping-grounds, and b) the smaller amount of fossil-fuel use, when traveling between home and workplace.
17. Because the LVT eliminates the advantage that landlords currently hold over our society, LVT provides a greater equality of opportunity to earn a living. Entrepreneurs can operate in a natural way– to provide more jobs. Then earnings will correspond to the value that the labor puts into the product or service. Consequently, after LVT has been properly introduced it will eliminate poverty and improve business ethics.
sigh. as we keep saying, we strongly support LVT but only as part of a broader tax system.
Even bigger sigh, if an LVT both grows the size of the economy, distributes the proceeds more equally and simplifies our tax/benefits system, why would we want damaging taxes on output that do the opposite?
The truth is, socialists are not really interested in reducing poverty or inequality.
An LVT is simply the method by which we equally share the value nature supplies for free.
Those would argue against a 100% LVT are therefore saying we should not share this Earth as equals. The very definition of injustice. As in Tax Injustice, lol!
BTW, even if it did not replace a single other tax, a 100% LVT would increase efficiency and reduce inequality in and of itself. But of course, we should scrap as many unfair, damaging taxes on output as possible.
put all your assets overseas where there isn’t an LVT, and if LVT is your only tax, then you can escape tax entirely, hey presto! May we wearily remind you that we support LVT but only as part of a comprehensive tax system. The LVT-only brigade are doing the LVT cause a great disservice through their extremism.
Nick, Bravo! That is one of the silliest KLNs I have ever heard (and I have heard it many times). If everybody wants to sell their UK land, to whom do they sell it? if nobody wanted to own UK land, it reverts back to the Crown i.e. the government, which would make life much simpler – we all just rent from the government with no need for LVT assessments etc.
don’t quite follow the logic here.
Even more wearily, and with a big yawn on top……
Yes, I agree, in theory the richest person in the UK, with the biggest income and owning the largest amount of capital wouldn’t owe the community a penny in taxes if their property only occupied marginal location, under an LVT only system (although I’ve never seen anyone advocate one). So what? As long as their income has come from producing goods and services rather than rent extraction, they’ve already contributed towards the well being of the community. Why punish them by taxing them for it?
Doesn’t it strike you as funny that Conservatives hate property taxes in general, and LVT in particular even more than they hate high taxes on income/capital? Why would that be do you think? According to your logic they should be queuing up around the block to fund a Single Tax party and its propaganda. Yet the very opposite is true. They have used their considerable wealth to fund academia and donate to political parties to make sure LVT never sees the light of day. The moral and economic difference between Land and Capital is now written out of history. Job done. For them, Socialism is but a very welcome smokescreen, and infinitely better than sharing the value derived from natural resources as equals.
Anyone who’d sell their property to avoid an LVT would have been economic parasite. The rental values they enjoyed, capitalized into incomes, interest or capital gains, now used as public revenue instead of a perpetual free lunch. If they leave the country, or move to a marginal location to avoid an LVT, that will benefit everyone else, as that property will be bought by someone who is a net contributor. We’d all end up much better off.
So, the only argument is, will there be enough net contributors paying the LVT in lieu of taxes on output to pay for the bulk of current public spending.
Those of us who have looked at the figures think a 100% LVT would get us to around £550bn, with the rest from other Pigovian Taxes and user fees. Taxes on income, capital and transactions are not only unnecessary, but shrink our stock of wealth and welfare, entrenching both poverty and inequality.
But even if they didn’t cover enough to pay for current spending, we should still have a 100% LVT, and then argue about the level of income/capital/transaction taxes afterwards, don’t you think?
If you are not in favour of a 100% LVT, you are by default saying, that for whatever reason, we should not share, as equals, the value nature supplies for free. As I’ve already said, that is the very opposite of economic justice. Extreme injustice :)
why punish a shopper for having to ‘pay’ for stuff they get in the supermarket? so let’s say a UK taxpayer has a hedge fund business, extracting fees from poor suckers, here and abroad. They put all those fees in a tax haven, and earn income on that, but pay no tax in the tax haven. But they live in the UK, using its roads and courts system and sewage system. UK only have LVT and no other taxes. How exactly have they contributed to the services they consume?
‘@Nick Shaxson July 11, 2016 at 5:50 pm
It’s irrelevant whether they pay tax in the “tax haven” or not. If your hedge fund manager lives in the UK, he pays LVT on the land that he occupies exclusively, whether directly or indirectly. If a place is well connected with roads, the rental value will be higher and so the LVT will pay for the roads. There could be road pricing and/or the existing system of fuel duty which approximates road use by motor vehicles.
Courts are already funded by fees from those who use them (and lose in them). Non-UK residents frequently use the UK court system.
I note from my water bill that I am forced to pay £400 a year to be connected to the sewage system.
So, a billionaire lives in a modest house, pay minimal LVT on their property and yet earn billions offshore, untaxed. It’s the same problem. The answer to this is to have LVT as part of a comprehensive tax system.
‘socialists’? You can try to put us in any pre-conceived pigeonhole you like, but you’ll find that we won’t fit. We at TJN make our own minds up about how the economy works, in our own way.
If the price someone paid for goods and service were based on income or capital accumulation levels, that would be a punishment. And indeed those with no income/capital therefore pay for nothing, getting Rolls Royces and a Mayfair penthouse for free. This would be so unfair, an so distort incentives our economy would collapse. Yet this is how we chose to pay for shared public services and it is considered, “fair” and “normal” and even”just”.
No wonder we suffer such economic dysfunction.
Most people believe we pay taxes to fund State services. We do not. That is guilty of putting the cart before the horse.
Most taxes and spending are re-distributional. Not much spending goes on core stuff like defense. It mainly welfare, schools, hospitals etc.
The fact we need such re-distributional tax/spending is acknowledgment there is not a fair distribution of the factors of production(income/capital/land) to begin with. If they were fairly distributed a Poll Tax would suffice to pay for core services.
Assuming we have competitive markets, reproducible factors Income and Capital should already be fairly distributed. After all, by earning and income and providing/consuming capital we are not depriving others of their ability to do so. In fact we enhance it. If income/capital are not fairly distributed then the best solution is to reform inefficient market, not higher re-distributive taxes.
Land is irreproducible and it’s value unevenly distributed. Therefore, even in competitive markets, there will always be an unfair distribution of the value derived from it, unless we all gain an equal share through the tax system. Failure to equally share the value derived from natural resources leads to excessively high inequality, and a loss of efficiency.
As all taxes lower the rental income and the selling price of Land ,the fair, efficient way to share the value derived from Land is a direct tax upon it ie a 100% Land Value Tax. The indirect, unfair, inefficient way to share the value derived from Land are taxes on income, capital and transactions.
We have chosen to do much more of the later, which creates the double whammy of not fully addressing the issue of inequality caused by unequal land value distribution (still over £200bn pa to go) , while at the same time shrinking the economy by taxing produced factors.
In short, the income you earn or the capital you accumulate bears no direct relationship upon the burdens we place on the community or even the value of public services we enjoy.
The rental value of land is the precise market measurement of how much we prepared to pay to exclude others for access to better wages or locational amenities (including publicly provided services and infrastructure). LVT is the equal sharing of compensation for this right to exclude (rent), currently capitalised into rental income, mortgage interest and capital gains.
As a UK citizen, and entitled to an equal share derived from land rents, either as a welfare (citizens income) or access to public services, income levels or lack of are entirely irrelevant. Just as they are when we pay for privately supplied goods or services.
prices we pay for goods and services are not based upon our income levels or accumulated capital. Prices are set by the market by which buyers are happy to pay compensation for the costs of producers.
Are you saying that unless you have an income you should be excluded from using State supplied services? In which case surely a Poll Tax would be the only fair
Likewise, the precise amount of compensation we (should) owe the community, as measured by the market, is the rental value of Land(location/natural resources) we exclude others from using. Thus, paying for shared services out from the rental value of Land(location/natural resources) aligns incentives in just the same way, for exactly the same reasons as when we pay for any other good or service.
The rental value of land is derived from the efficient exploitation of agglomeration effects and a preference for spending on locational amenity over alternative goods and services. In plain English, we get higher demand for places where wages and amenities are highest ie the centers of larges cities/metroplexes like London/SE. The
Which is why taxing income/capital bears no relation to the burdens we place on the community or even the value of any benefit from public services we may or may not use. This is why “taxes” distort incentives, leading to economic dysfunction, making us all poorer. Not to mention a whole industry based upon there administration, compliance, avoidance and evasion. This industry does not increase our stock of wealth or economic welfare. It is a drain upon it, of which you an the TJN are a part of. No offense intended.
Lets take your example of someone with a large income from abroad, but is a UK citizen choosing to live in a marginal location in order avoid any taxes. (It wouldn’t happen, but just for arguments lets say they did). They would also receive a Citizens Income, just to rub salt into your wounds.
Why do you suppose