Applications in tax policy
Demonstrating the full use of tax policy
as a tool to fulfill human rights
“Fiscal policies are a tool that States can employ to comply with
their international human rights obligations.” (para. 1)
Although states have discretion to formulate the tax policies
most appropriate to their circumstances, several human rights
principles set limits to such discretion. (para. 4)
While economic and social rights are, generally, subject to
progressive realization, “States that claim resource constraints
have the burden of proof to show that every effort has been made
to move towards the full enjoyment of economic, social and
cultural rights as a matter of priority, and that they are truly unable
rather than unwilling to meet these obligations.” (para. 27)
Thus, a state that omits use of a possible tax measure that
could generate public revenue should demonstrate why that
measure is the best suited to its circumstances. It should also
show that in using its discretion to choose the most appropriate
tax measure it is not violating principles such as progressive
realization or maximum available resources.

Raising revenue
“In some States, despite significant efforts to increase revenue
through taxation, the amount actually collected is demonstrably
inadequate to realize human rights.” (para. 55)
“Low levels of revenue collection have a disproportionate
impact on the poorest segments of the population and
constitute a major obstacle to the capacity of the State to
finance public services and social programmes.” (para. 44)
“The quality, accessibility and availability of goods and services
needed for the realization of human rights, such as the rights
to an adequate standard of living, health, education and social
security, will hinge on the resources that the State is able to
collect.” (para. 43)
When a state claims not to have enough revenue to comply
with its human rights obligations, an indicator of whether it
is exhausting its room to raise revenue is the tax-to-Gross
Domestic Product (GDP) ratio. In developed countries,
average tax-to-GDP ratios rates exceed 30 per cent, whereas
the average in South Asia is 12 per cent, and in Latin
America less than 20 per cent.2 The International Monetary
Fund concurs that in a lot of countries the ratio of actual to
potential revenues remains well below what it could be.3

Of course, efforts to raise more revenue should also be
compatible with human rights principles.

Corporate tax incentives
“Many least developed countries. . . offer extremely favourable
tax deals to foreign investors in agriculture and mining owing
to the perceived competition between countries for this
investment. These incentives warrant a heightened level of
scrutiny in human rights terms, because they restrict the State’s
revenue and therefore the resources it is able to devote to rights
realization.” (para. 64)
Tax incentives or tax holidays for corporations represent
foregone public revenue in amounts frequently large, especially
when compared with the human rights needs that could have
been met with such revenue. However, it is possible that tax
incentives are offered for purposes that also would advance
human rights, in which case the said purposes will need to be
spelt out clearly:
“As in any case where a State is allegedly failing to use
its maximum available resources to fulfil obligations to
progressively realize economic, social and cultural rights,
incentives would have to be justified by a clear description
of deliberate, concrete and targeted advances towards the
fulfilment of human rights that can be expected from their
implementation. States parties to the International Covenant
on Economic, Social and Cultural Rights would also have the
burden of proving periodically that the granting of corporate
tax breaks was the least restrictive policy option from the
perspective of economic, social and cultural rights.” (para. 67)
For instance, states commonly justify granting incentives on the
need to attract foreign investment. So, based on jurisprudence
from the Committee on Economic, Social and Cultural Rights,
in a case like that the state will have the burden of showing
which human rights the investment meant to be attracted by
the incentives will advance. It will also have to show that the
incentive was the option least restrictive to economic, social and
cultural rights.5
Given evidence that the success of fiscal incentives to attract
foreign investment is limited, the link between offered incentives
and incoming investment cannot be lightly presumed. So the
state will need to show that the investment would not have
come absent the incentive and that the benefits from the
investment outweigh its cost.
“Incentives sometimes take the form of a “tax stability” “or
“advance pricing” agreement, signed with foreign investors to

Select target paragraph3