The United Nations Committee on Economic, Social, and Cultural Rights has urged governments to adopt fair and effective tax policies to promote equality and uphold economic, social, and cultural rights. The committee’s statement, released today, highlights the vital role of sound fiscal policies in reducing poverty and bridging socio-economic gaps.
Taxation: A Tool for Social Justice
The committee emphasised that taxation is crucial for resource mobilisation and supporting economic, social, and cultural rights. However, many countries’ regressive tax systems are failing to address high income inequalities.
“One such example is a tax policy that maintains low personal and corporate income taxes without adequately addressing high income inequalities,” the committee stated.
Consumption taxes, like value-added tax (VAT), often place a disproportionate burden on disadvantaged groups, including low-income families and single-parent households. These households spend a larger share of their income on everyday goods and services, making VAT an unequal contributor to national revenue.
A Shift to Direct Taxation
The UN committee urged governments to move towards more equitable tax structures by reducing dependence on indirect taxes and strengthening direct income taxation. Wealthy individuals and large corporations should contribute a fair share to public revenue, ensuring resources for essential public services.
A well-designed tax system, the committee noted, should generate sufficient revenue while actively reducing socio-economic inequalities. Comprehensive assessments of tax policies’ impacts on different income groups, women, and disadvantaged communities were recommended to ensure fair resource distribution.
Global Tax Governance: A Need for Cooperation
The committee welcomed the General Assembly Resolution 78/230, which supports the creation of a United Nations Framework Convention on International Tax Cooperation. This initiative aims to tackle tax evasion, illicit financial flows, and corporate profit-shifting.
The committee criticised low corporate tax rates, wasteful tax incentives, and lax regulations on illicit financial activities. These practices lead to a “race to the bottom,” depriving nations of funds needed for health, education, housing, and social security.
Combating Tax Abuse
Governments were called upon to regulate financial institutions and corporate entities to prevent tax abuse. “States parties should take all measures to combat illicit financial flows […] by business enterprises operating within or domiciled in their territory,” the committee urged.
Enhanced international cooperation, financial transparency, and a globally coordinated minimum corporate tax rate were proposed to build an inclusive and fair global tax system.
Aligning tax policies with international human rights obligations could significantly boost resource mobilisation and reduce inequalities, promoting economic, social, and cultural rights for all.
