Taxation: Towards a better dialogue on economic and social rights?
Published on Fri, 2016-09-23 01:20
Unfortunately, whenever civil society and government strike discussions on human rights a certain unease sets in. The mood quickly dampens. On one hand, government mounts a defensive posture and on the other, civil society embarks on an offensive strategy. This gets worse when you throw in the word taxation. Like a spark to an inflammable concoction, you have the perfect recipe for an explosive discussion.
In East Africa, arguments for increasing expenditure on economic, social and cultural (ESC) rights as articulated by civil society are met by a stern and covertly dissenting response from government. The argument is often along the lines that ESC rights are of progressive, as opposed to immediate, realization. Simply put, these rights will take an unspecified lapse of time to realize. From an administrative and pragmatic perspective this makes sense and, yet, from the civil society perspective to leave the debate at that is to entirely miss the point. Taking the right to education as an example, one can view the pragmatic and administrative perspective of government vis-a-vis the substratum of rights and the ecosystem for their fulfillment that ESC rights advocacy speaks to. It is true that despite education being a fundamental human right, one cannot purport to educate an entire population if the requisite conditions are not in place. There is need for infrastructure by way of schools, resources such as textbooks and teachers. Civil society is cognizant that developing countries require time to put in place such conditions. However, to put an end to the debate there and use this as a counter argument to the implementation of ESC rights would represent a misunderstanding of the entire agenda. This divergence gives rise to actions at cross purpose whose results prove to be of little use. It is no wonder that with that mindset, discussions are set to deteriorate.
ESC rights speak to fundamental survival necessities, and for any individual who is deprived of them, as well as their economies and societies, the effects can be quite long-term. Viewing the right to education from an ESC rights perspective one would analyze the socio–economic factors required to realize these rights and the long-term outcomes of the failure to do so, on the larger societal fabric. Limited funding has a direct measurable effect on gender equity in access to education and eventual disparity in life outcomes. According to the Human Development Index 2015, girls in East Africa have, on average, less years of schooling than their male counterparts. Coupled with insufficient funding, an already disadvantaged girl child would find it even more difficult to get an education. This has a direct correlation to what she will earn in her lifetime which is significantly less than her male counterpart. Therefore, the net effect of poor funding in education would have a direct implication on productivity, concomitantly exacerbating the inequality gap between men and women in the long run.
That is, of course, not news. The point of referencing this example here is that the case to invest in ESC rights, important as it is, can get lost in discourse around fulfilment of ESC rights that has been skewed towards direct violations as opposed to state action to prevent the violation. Often, the plaintiff is compelled to make a case based on policy and legislative provisions i.e. provisions of international, regional and national instruments which safeguard economic, social and cultural rights. However, the nuance of progressive realization may bog the arguments presented without necessarily subjecting legal provisions of ESC rights to any objective test. The progressive realization is an abstract defense used by states whose subjective nature may leave a claimant with little to grasp on, forgetting that the progressive realization embedded in instruments on ESC rights should be interpreted as a protection to right holders, not to the state. Indeed, against a progressive realization threshold, there is a litmus test for ESC rights and that is maximum available resources. The question of maximum available resources is, in turn, inextricably linked to state revenue. State revenue in East Africa is largely derived through taxation. A two-pronged approach of assessing tax revenue provides the benchmark for state action. Tax actually realized and apportioned towards fulfillment of ESC rights and, more importantly, the potential revenue a state would have realized had it been guided by its primary objective of fulfilling ESC rights. The latter approach is the focus of tax justice advocates. State complicity that leads to tax leakages through legal loopholes and poor foreign investment policies is the litmus test for weighing a state’s compliance with obligations on ESC rights.
Tax Justice Network – Africa and ActionAid International estimate that countries in the East Africa Community lose USD 2 billion annually due to tax Incentives. These incentives paint a picture of foregone revenue as a policy option undertaken by government and an opportunity cost for service delivery.
The issue however does not solely lie with tax incentives. The narrative around offering tax incentives is often about attracting foreign direct investment. Unfortunately, in the East African scenario this has led to a race to the bottom. Countries compete against each other to offer the most lucrative terms for doing business to their long-term detriment. On the flip side, corporate entities employ aggressive tax avoidance and, in some cases, even evasion tactics to reduce their tax bill. In effect, tax incentives are exacerbated by corporate action that further undermines domestic resource mobilization capacities of states. In the three-legged race to undermine domestic resource mobilization, the citizenry comes in last as services are not delivered, government boasts of attracting new investors and corporate entities skip all the way to the bank.
The Taxing Rights Are Human Rights report by the East Africa Tax and Governance Network (EATGN) shows that revenue lost through tax incentives is an opportunity cost and, one in which the opportunity rarely matches the cost. Tax incentives need neither be awarded under the discretion of individual state officers nor without a thorough cost-benefit analysis. The push by civil society is for a comprehensive framework that balances the benefits of foreign direct investment against the larger developmental goals of fulfillment of ESC rights. To view each in isolation will often put government and civil society on a continued collision course with the citizenry of the state, none the better.
By Robert Mwanyumba and Matthew Magare.