Irish corporate tax policy to be assessed by the UN as a human rights issue

As reported in the Irish Times the UN Committee on the Rights of the Child has taken the decision to examine the impact of Ireland’s international tax policy on the ability of countries of the Global South to raise revenue and fulfil their human rights obligations, in particular those that relate to children. As a signatory to the UN Convention on the Rights of the Child (UNCRC) Ireland is obliged to avoid policies that undermine the human rights of children at home or abroad. This is the first time that the external impact of Irish tax policy will be assessed under an international human rights instrument, and comes in response to a detailed submission  from a coalition of Irish, Ghanaian and international civil society organisations, including Oxfam Ireland.

Tax policy is critical for the realisation of human rights. It shapes states’ capacity to raise revenue, fund essential public services, and consequently to fulfil their human rights obligations. Academics, UN experts and civil society organisations have all emphasised this link, particularly in relation to economic, social and cultural rights – without fair and functioning taxation systems, efforts to deliver adequate housing, healthcare and education and to tackle poverty and inequality are badly undermined.

Crucially, this impact is not limited neatly within national boundaries. In a globalised economy, multinational corporations can exploit divergent domestic laws and a climate of competition, rather than cooperation, between states to dramatically reduce their tax bills. Through complex corporate structures, profits are shifted across borders into low or no tax jurisdictions, sheltering billions of euro every year, eroding tax bases and public budgets. These practices are particularly harmful for developing countries, which are more reliant on corporate income tax than higher income countries. Vital revenue is siphoned away, prolonging a country’s reliance on aid, exacerbating inequality and keeping people trapped in poverty.

Too often Irish corporate tax policy is considered only from the narrow perspective of the benefits it can bring to Ireland – insufficient attention however is given to its negative impacts beyond our borders. Other countries’ ability to raise badly needed revenue is undermined by tax avoidance, and in countries of the Global South, this can mean the difference between life and death.

Ireland’s role in the international tax avoidance landscape is well-documented, recognised by EU institutions, UN Commissions, bodies within the US Congress, and academics. A recent working paper by the National Bureau of Economic Research (NBER) found that ‘more than $616 billion in profits were shifted to tax havens in 2015, close to 40% of multinational profits’, and identified Ireland as ‘the number one shifting destination, accounting for more than $100 billion alone.’ Ireland also continues to negotiate tax treaties with countries of the Global South in a manner that facilitates avoidance, and undermines other countries’ capacity to raise revenue. In pursuing a recent tax treaty with Ghana, Ireland went against the advice of the Department of Foreign Affairs, who advised that the effect of such tax treaties between ‘developed and developing countries is that capital flows from developing to developed nations’.

Growing public demand for tax justice has brought increased scrutiny on these practices, including by UN human rights monitoring bodies. In 2016, the UN Committee on the Elimination of Discrimination against Women (CEDAW) expressed concern regarding Switzerland’s financial secrecy and tax policies and how they impact other states’ capacity to raise revenue and fulfil women’s rights. Successive UN Special Rapporteurs on extreme poverty and human rights have called on governments to stop facilitating avoidance, and to recognise the impact this has on some of the world’s poorest communities.

In October 2020, the UN Committee on the Rights of the Child announced that, for the first time ever, the negative consequences of Irish tax policy will be examined under the framework of another key international human rights treaty: the UN Convention on the Rights of the Child (CRC). As a party to this Convention, Ireland is obliged to avoid policies that foreseeably undermine the realisation of children’s rights, at home or abroad, and its progress is reviewed at UN level every five years. But as the evidence presented to the Committee demonstrates, it is currently failing to meet these obligations due to its facilitation of harmful tax avoidance.

The Irish government must now formally address the impact of its tax policy on the realisation of children’s rights in other countries, in a detailed submission due by the end of 2021. It will then be formally reviewed by the Committee at hearings in Geneva in May 2022 for compliance with its international law obligations under the Convention. The coordinating civil society organisations, including Oxfam Ireland, will also build on their initial submission and provide further evidence to the committee as part of this process.