Tax evasion is about children’s rights

The UN Committee on the Rights of the Child should ask Switzerland to report on the extraterritorial impact of its tax policy, says international law professor Alexandra Dufresne.

This content was published on November 6, 2021 – 10:00

The response to the Pandora, Paradise and Panama documents has tended to focus on the threat that tax evasion and lack of transparency pose to the ability of governments to fight corruption, ensure tax fairness and prevent money laundering. What is largely missing from the debate is the recognition of the direct impact of tax evasion on the human rights of children.

Tax evasion is fundamentally a matter of children’s rights. Children are disproportionately harmed by tax evasion facilitated by jurisdictions with low transparency standards. The realization of their most important rights – the right to education, health care, food, housing, freedom from violence and a sustainable environment – depends on the capacity of their State to origin to collect sufficient tax revenue. While adults can influence fiscal and budget priorities by voting or holding public office, children are not free to do so.

Moreover, the countries where children are most severely affected by insufficient income, mainly the states of the South, are not the same as those which benefit most from serving as “tax havens” for multinational corporations and corporations. individuals and wealthy families, primarily the Global North states. The ability to “externalize” the costs of tax avoidance policies on “children of others”, especially children from low-income familiesExternal link country, makes reform in this area very difficult.

Last month,External link the United Nations Committee on the Rights of the Child (CRC) has examined Switzerland’s human rights record with regard to children. Although the CRC has expressed concernExternal link In terms of violence and discrimination against vulnerable groups of children, Switzerland has generally obtained good results with regard to children in its own territory.

But what about the extraterritorial impact of Swiss fiscal and financial policies on children abroad, for example through their negative impact on the capacities of states?External link to achieve sustainable development goals such as good health, quality education, gender equality, clean water and sanitation? A flaw in the CRC’s review process is that it does not yet systematically take into account externalities – in this case, the negative effects suffered by children (mainly in countries of the South) as a result of tax transparency policies. and financial of a reporting State. In its September 2021 reviewExternal link and its concluding observations of October 2021,External link the CRC did not investigate or mention these issues.

In contrast, the CRC recently asked Ireland External linkto describe the measures taken to “ensure that tax policies do not contribute to tax abuse by companies operating in other countries, leading to a negative impact on the availability of resources for the realization of children’s rights in those countries “. It is an excellent precedent. The CRC should also ask Switzerland to do so in its next periodic report, due in March 2026.

The need for more transparency

It is estimated that tax havens hold 10% of the total world GDP. Despite recent reformsExternal link, Switzerland is ranked by the Tax Justice Network as the fifth largest tax haven, responsible for $ 12.8 billion in lost revenue to other countries. (Ireland is ranked 11thExternal link). While it only hosts 11%External link of the world’s population, Switzerland is responsible for 5.1% of global tax evasion losses. It also ranks third in the world for financial secrecy.External link Efforts in Parliament last spring to close some of the loopholes failed.External link

There is a precedent for recognizing the extraterritorial effect of the Swiss fiscal and financial transparency policy on human rights. In 2016, under pressure from NGOs and academic institutionsExternal link, Switzerland was tasked by the Committee for the Elimination of All Discrimination against Women (CEDAW) to assess and report publiclyExternal link the extraterritorial effects of its financial secrecy and fiscal policy on women’s rights. CEDAW called for these periodic reviews to be independent, participatory and impartial. External link

But the issue has yet to receive the attention it deserves.

The most important reason is the lack of transparency itself. The complex web of policies that allow wealthy individuals and businesses to hide their wealth is complicated and opaqueExternal link. As evidenced by the Pandora, Paradise and Pentagon Papers scandals – which only came to light after data breaches – financial secrecy rules make it difficult to determine how much money is at stake or where it is flowing. Financial services advisers and tax authorities are engaged in a ‘cat and mouse’ game in which innovative strategies for hiding wealth develop faster than the ability of governing authorities to update their laws and regulations.

In addition, understanding and investigating these transactions often falls outside the training and expertise of child rights experts and advocates, who often have training in psychology, social work, health, education and children’s law, rather than fiscal and financial law and policy. Business and human rights initiatives tend to focus on issues other than tax evasion.External link

For this reason, it makes sense to place the onus on governments to calculate and report the costs of their policies.. Governments are those who have access to relevant information. To avoid unnecessary search burdens, the CRC could start by asking the handful of jurisdictions most directly responsibleExternal link for the majority of tax evasion, including SwitzerlandExternal link, report. The CRC could model its reporting requests on its 2020 requests to Ireland, as well as CEDAW’s 2016 request to Switzerland, which specifically mentions the extraterritorial impact of financial secrecy as well as tax policy.

Since a significant portion of tax evasion is committed by extremely wealthy individuals and families, the CRC should consider adding tax evasion by individuals. Perhaps more importantly, the CRC should ask Switzerland and other concerned states to produce concrete impact assessments, based on current evidence, as well as specific policies. This would reduce the risk that States Parties would avoid undertaking serious data-driven analysis and seek to “respond” to such inquiries by reference to a general report on business and human rights principles, as Switzerland appears to have done in its 2020 CEDAW submissionExternal link.

Switzerland, like Ireland and other tax havens, must take into account the costs of its national policies of fiscal and financial transparency on children abroad. Measuring and publicly reporting these costs is the first step.

The opinions expressed in this article are solely those of the author and do not necessarily reflect those of SWI

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