By Liz Nelson
The United Nations Independent Expert on the effects of foreign debt and human rights has released a strong statement on the ethical responsibility of corporations in the wake of the Paradise Papers revelations. The current Independent Expert, Juan Pablo Bohoslavsky has said ““Corporate tax abuse undermines social justice and human rights worldwide.” His remit includes monitoring the impact of illicit financial flows on human rights and here he helpfully steers away from the immediate obsession with celebrity and individual greed, instead focusing on the systemic flaws of the global system, in particular calling out “the law firms that facilitate tax avoidance schemes must assume their responsibility.” It is encouraging that the UN is signaling an awareness and understanding of the devastation reaped globally by Illicit finance, tax abuse and financial secrecy. We share his statement here in full:
Paradise Papers: States must act against abusive tax conduct of corporations – UN human rights expertsGENEVA (9 November 2017) – International corporations responsible for systematic tax abuse should be downgraded by rating agencies and investment funds in their environmental, social and governance performance, UN human rights experts have said, as information from the leaked Paradise Papers continues to be made public.
“States must stop harmful tax competition amongst each other and work together to stop unethical tax avoidance schemes for wealthy individuals and international corporations. Corporate tax abuse undermines social justice and human rights worldwide,” said Juan Pablo Bohoslavsky, whose remit as a UN Independent Expert includes monitoring the impact of illicit financial flows on human rights.
The Paradise Papers have exposed systematic tax avoidance schemes by well-known international corporations, making use of tax havens in places such as Bermuda, the Cayman Islands, and the Isle of Man.
“We call on businesses to assume their corporate responsibility, in line with the UN Guiding Principles on Business and Human Rights”, said Surya Deva, chairperson of the UN Working Group on Business and Human Rights. “All business enterprises have a responsibility to avoid adverse human rights impacts caused or contributed by their tax evasion practices”.
The experts stressed how business enterprises should comply with both the letter and spirit of tax laws and duly contribute to the public finances of the countries in which they operate, as also clarified in the OECD Guidelines for Multinational Enterprises.
The experts note that the series of scandals, including the Luxembourg and Bahamas leaks, the HSBC files, the Panama Papers, and now the Paradise Papers, made it clear there were widespread practices of tax abuse that had to be addressed.
“Wealthy individuals and international corporations are continuing to engage in unethical practices, reducing their tax burdens to minimal levels by using tax havens, which undermines the realisation of human rights” said Mr. Bohoslavsky.
The experts noted that many States are struggling with increased debt levels as tax revenues do not match public expenditure. “Instead reducing spending on social security, public health care, housing or education, Governments should make greater efforts to ensure tax justice,” the experts said
The experts pointed out that corporations use publicly-funded infrastructure to transport and sell their products, employ people who have normally been educated at public expense, and expect their managers and employees to receive publicly-funded health care when they are ill. Yet, corporations shift their profits around to reduce their own tax contribution to a minimum.
The experts also noted that the law firms that facilitate tax avoidance schemes must assume their responsibility.
“The UN Guiding Principles apply to law firms too – they should consider human rights implications of their legal advice given to businesses”, Mr. Deva noted, drawing attention to the Practical Guide on Business and Human Rights for Business Lawyers adopted by the International Bar Association in 2016.
“It is not sufficient for business corporations to ensure respect for human rights and international labour standards in business practices and value chains. These commitments have to extend to taxation, if firms are to be regarded as ethical,” the experts concluded.
The issue of corporate tax avoidance will also be addressed at the UN Forum on Business and Human Rights that will be held in Geneva, Switzerland, from 27 to 29 November 2017.
Published on Tax Justice Network on November 13, 2017.
Highlighting the problems posed by illicit financial flows globally, including undermining rule of law and human rights, a United Nations human rights expert has called on Switzerland to ensure that so called dirty money – which stems from tax evasion and corruption – does not enter its financial market.
“Despite significant efforts in adopting legislation and improving procedures to detect suspicious transactions, the risk that the Swiss financial market is used for money laundering remains,” said Juan Pablo Bohoslavsky, the UN Independent Expert on foreign debt and human rights, in a news release issued by the Office of the High Commissioner for Human Rights (OHCHR).
Facilitated by weak institutions and lack of good governance in countries of origin and financial opacity in countries of destination, illicit financial flows, such as money laundering are a particular concern in developing and under developed countries, syphoning money and resources which could have otherwise used for public services.
In the case of Switzerland, the UN expert noted that the risk of money laundering is particularly highlighted by the involvement of several banks in the Petrobas corruption scandal and in the suspicious cash flows linked to the Malaysian sovereign fund 1MDB.
“It is especially troubling that these events are not from years ago – the money was still being accepted until quite recently,” added Mr. Bohoslavsky, who today concluded his first official visit to the European nation.
In the news release, the expert also underlined that criminal sanctions in Switzerland for assisting foreigners to evade taxes remained relatively weak noting that criminal liability arises only if the tax evaded in a foreign jurisdiction exceeds 300,000 CHF (about $307,500).
He also urged that the staffing, resources and powers of the Swiss Financial Market Supervisory Authority needed to be proportional to the size of the Swiss financial market, and those who infringed standards needed to be named to ensure individual corporate accountability.
Further, noting that favourable tax arrangements in Switzerland made it attractive for multinational corporations to establish their headquarters in the country, but also provided incentives for profit-shifting, affecting tax revenues in foreign countries.
“I call upon the Swiss authorities to carry out a social and human rights impact assessment of the proposed corporate tax reform package, which should include an analysis of how the reforms will impact on tax revenues available for the realization of economic and social rights within Switzerland and for individuals living abroad, in particular in developing countries,” said the UN expert.
Mr. Bohoslavsky visited the country at the invitation of the Swiss authorities, where he met with Government officials as well as with leaders in the banking, financial and trading sectors, civil society and the academia in Bern (the capital), Basel, Geneva and Zurich.
His findings and key recommendations will be presented in a comprehensive report to the Geneva-based Human Rights Council – the highest UN intergovernmental forum on rights issues – in March 2018.
Independent Experts and Special Rapporteurs are appointed by the Human Rights Council to examine and report back on a specific human rights theme or a country situation. The positions are honorary and the experts are not UN staff, nor are they paid for their work.
Published on the UN News Center on October 4, 2017.