Statement prepared by a group of participants of the Financial Transparency Coalition and Latindadd Conference “Hidden Money, Hidden Resources: Financing Development with Transparency” Lima, 14 – 15 October 2014.
Why tackle the links between illicit capital flows, tax policies and gender justice?
The loss of tax revenues due to international tax evasion and avoidance significantly reduce the funds available to finance policies aimed at fulfilling the human rights of women and girls and gender justice. Due to the structural nature of gender inequality and its intersection with other categories such as age, race-ethnicity, sexual orientation and income, women in most of societies continue to be overrepresented in the lowest quintiles of the income distribution, continue to be the most responsible for unpaid and care work, continue to be concentrated in the most precarious and poorly paid jobs, are still a minority in the spaces of representation and leadership in political, labor or territories, still face gender-based violence, human trafficking, and continue to have their sexual and reproductive rights and autonomy limited.
Under international human rights law, states have the duty to mobilize the maximum available resources, including through combating tax evasion and avoidance, to implement public policies for the realization of the human rights of women and girls. State intervention in areas such as social protection, productive diversification and employment, education, care, sexual and reproductive health are essential to reverse multiple discrimination and structural gender inequalities. When the state does not mobilize sufficient resources or provides inaccessible and low quality services, gender inequalities are perpetuated or exacerbated. In turn, in a context where the private sector and multilateral institutions promote public-private partnerships as a privileged strategy to finance development, combating illicit financial flows is an alternative to substantially increase state revenue and provide the necessary resources to fulfill state obligations concerning human rights and non-discrimination. International tax evasion and avoidance has negative impacts on vertical equity, in the North / South gap and the progressiveness of the tax systems of developing countries that disproportionately affect women.
Tax evasion and avoidance not only affect horizontal equity as individuals and companies with the same capacity to pay are not contributing in the same way, but also reduces the redistributive impact of tax policy. According to the report of the Special UN Rapporteur on Extreme Poverty and Human Rights, “tax abuse by corporations and high net-worth individuals forces Governments to raise revenue from other sources: often through regressive taxes, the burden of which falls hardest on the poor. Therefore, if States do not tackle tax abuse, they are likely to be disproportionately benefiting wealthy individuals to the detriment of the most disadvantaged” (A/HRC/26/28, 2014, p. 15)1. In turn, tax regimes are not gender neutral. Women and men experience the impact of tax policies as part of the workforce, as consumers, producers and as responsible for the “care economy” within and outside households. In this sense, regressive tax structures have disproportionate impacts on women.
The Rapporteur’s report notes that:
“Women, who tend to use larger portions of their income on basic goods because of gender norms that assign them responsibility for the care of dependents, bear the regressive brunt of consumption taxes” (A/HRC/26/28, 2014, p. 12).
“Certain tax arrangements that directly or indirectly disincentivize women’s participation in the labour force or promote the male bread-winner family model could threaten women’s enjoyment of human rights”. (A/HRC/26/28, 2014, p. 6)2
“Policymakers should be aware of the extent to which tax policies, such as the treatment of income derived from jointly-owned assets of married couples, strengthen or break down gender inequalities, or discriminate against different types of households” (A/HRC/26/28, 2014, p. 13)
States must review tax structures, codes and instruments for explicit and implicit gender bias and ensure they do not reinforce existing gender inequalities, including through their impact on unpaid care work.(A/HRC/26/28, 2014, p. 20)
Therefore, increasing the tax base in a progressive way would imply shifting the burden of taxes away from women, people living in poverty and other marginalized groups such as gays, lesbians and trans who are at the bottom of the income distribution towards highly profitable sectors such as the financial sector and the extractive industries that are benefiting from tax incentives and subsidies and using strategies of tax evasion and avoidance to shift their profits to low-tax jurisdictions. To combat tax evasion and avoidance and their impacts on the ability of states to guarantee human rights, and especially women’s rights, and reduce inequalities at the global level, it is necessary to reverse the “race to the bottom”, to move towards a new social contract that shifts from tax competition to tax cooperation, and towards transparency and public availability of financial information. Furthermore, the global network of facilitators (banks, consulting firms, investment advisors and legal and tax advisors) and financial secrecy jurisdictions3 that serve as a den for both capital flight as a:
- A/HRC/26/28. (2014). Report of the Special Rapporteur on extreme poverty and human rights (No. A/HRC/26/28). Human Rights Council, United Nations. R ecuperado a partir de http://www.ohchr.org/EN/HRBodies/HRC/RegularSessions/Session26/Documents/A_HRC_26_28_ENG.doc
2. For example, in the case of Ecuador, since 2008, in households with one person perceiving income, expenses of the dependent person (usually the woman) can be deducted in the tax return of the taxpayer person. However, if the dependent person enters the labor market and his/her salary does not exceed the base exempted, household expenses should be deducted by both taxpayers separately. This implies that the payment of taxes tends to be greater for the first taxpayer because he/she can not deduct the expenses of the person entering the labor market. Source: Vásconez, Alison and Paola, Gutiérrez (2010). “Ruptures and continuities of the tax and transfer system in Ecuador: Analysis and Proposals” in Taxation and Gender Equity, María Pasos Morán and Maribel Rodríguez. Madrid, Spain: Fundación Carolina. CeALCI.3 Tax Justice Network elaborates a Financial Secrecy Index ranking jurisdictions according to their secrecy and the scale of their activities. More information available at_ http://www.financialsecrecyindex.com/ result of tax evasion and avoidance and money from networks of drug trafficking and trafficking in human beings (for labor slavery, sexual exploitation and trafficking of organs) that disproportionately affect women and children in developing countries -79% of trafficking in human beings is performed for the purpose of sexual exploitation- must be confronted. Therefore, we need a radical change in the international tax and financial architecture oriented towards development, equity and human rights for all. The following organizations endorse the statement:Centre for Budget and Governance Accountability, India Christian Aid, Development Alternatives with Women for a New Era (DAWN), Red latinoamericana sobre Deuda, Desarrollo y Derechos (LATIDADD), Red de Justicia Fiscal de América Latina y El Caribe Tax Justice Network Women for Tax Justice.
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