UN submission sets out racist impacts of UK’s ‘second empire’

Together with its network of crown dependencies and overseas territories, the United Kingdom is the world’s largest facilitator of crossborder tax abuse. Indeed the UK’s ‘spider’s web’, as it is often known, was developed as a global system of economic extraction during the retreat of its formal colonial empire.

A new submission delivered to the Committee on the Elimination of Racial Discrimination sets out the deeply racialised impacts of this injustice, which prejudices the majority non-white countries of the Global South, and the pernicious role the UK is playing in seeking to hinder efforts at meaningful reform. The United Kingdom has emerged as a key blocker at the negotiations on a new Framework Convention on International Tax Cooperation at the United Nations, an initiative brought forward by the Africa Group in an effort to address the historic and ongoing plunder of their economies due to massive levels of international tax abuse.

The UN Tax Convention, if effectively designed and implemented, would go a considerable way in disrupting neocolonial corporate practices that maintain structural discrimination in the global economy. Last December, the UK not only voted against the Africa Group’s resolution to start the negotiations, however, but also introduced an amendment to rid the proposal of any mention of the word ‘convention’, which would dramatically weakening the potential of the initiative. That amendment was roundly rejected by the community of nations at the UN, however.

The UK is among a small group of powerful Global North countries which would prefer to keep standard-setting on international taxation at the Organisation for Economic Cooperation and Development – also known as the ‘rich countries club’ – where the voices of poorer nations have long been excluded.

As argued in the submission, the UK, both through its own facilitation of abusive tax practices and its protagonism at both the UN and OECD, is seeking to maintain an unjust international financial architecture that significantly undermines the capacity of poorer nations to provide essential public services like education, housing, healthcare and decent living standards.

The joint civil society submission came ahead of the UK’s appearance before the Committee on the Elimination of Racial Discrimination, when it was interrogated over its efforts to tackle racial injustice at both the national and international levels. It came at a time when the UN human rights system is paying more and more attention to the prejudicial impacts of crossborder tax abuse, and the structures of domination and injustice that are embedded in the global financial architecture.

In December last year, a group of eight UN special procedures – independent experts appointed by the Human Rights Council to investigate urgent and immediate human rights concerns – issued a communication to the OECD warning that its proposed ‘two pillar solution’ to corporate tax abuse could have a discriminatory impact on poorer countries on the grounds of gender, ethnicity and race, and could widen inequality both within and between states. In particular, they warned that the proposed ‘solution’ would erode countries’ fiscal capacity to resource economic, social and cultural rights and the right to development. Despite the gravity of the concerns raised in the communication, and the fact that the UN experts explicitly requested a response, the OECD simply opted to ignore the letter.

At the heart of the CERD submission is the understanding that the existing architecture of international tax governance was built on structures of historical racial oppression anchored in slavery, colonialism and apartheid. Historians have demonstrated that the proliferation of tax havens, and with it the plunder of desperately-needed revenue for public services, emerged directly from the decolonisation process. Indeed the OECD’s long-standing stewardship of international taxation, which makes crossborder tax abuse relatively straightforward for both multinational companies and high net worth individuals, dates back to the 1960s when the USA and Canada joined together with European nations to establish the OECD. One of the main motivations was to displace the UN’s efforts in the arena of global tax governance with a more exclusive process. At the time, newly-independent states across the Global South were pursuing progressive proposals and the Global North’s economic elite, which had funnelled vast amounts of money into dependent territories and former colonies to avoid paying taxes at home, feared they would have nowhere left to hide their wealth. In this regard, it can be argued that former colonial powers like the UK and France have a particular obligation to reform international taxation in a way that remedies the racially discriminatory economic harms of the past rather than perpetuating them.

As things stand, a staggering $309 billion in corporate profits is shifted into the UK’s ‘second empire’ every year, costing the world over $84 billion in lost tax revenue. This means the UK is responsible for 27 percent of the $311 billion the world loses to corporate tax abuse each year. It also accounts for more than half of the $169 billion lost to offshoring of private wealth, which translates into another $85 billion of revenue foregone. Importantly, it is not ordinary UK citizens, but only the country’s economic elite, who benefit from this injustice. The UK itself loses close to $45 billion in tax each year thanks to the system it is seeking to maintain.

The complaint delivered to the UN Committee on the Elimination of Racial Discrimination has been submitted jointly by:

• The Center for Economic and Social Rights (CESR).
• Tax Justice Network
• Global Network of Movement Lawyers, Movement Law Lab.
• ESCR-Net
• Centro de Estudios Legales y Sociales (CELS)
• Minority Rights Group International
• Red de Justicia Fiscal de América Latina y el Caribe
• The Government Revenue and Development Estimations (GRADE) initiative, St Andrew’s University
• Steven Dean, Professor of Law at Brooklyn University