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Introduction

Fiscal policy and human rights–civil and political, economic, social and cultural–are closely interlinked and currently there is a growing recognition that fiscal policy is subject to the commitments and obligations that States have assumed at the international level and under their own constitutions.

In this respect, human rights norms are seen as providing a legal framework to which fiscal policy must conform. The Inter-American Commission on Human Rights (IACHR) has established that human rights principles are “fully applicable in fiscal policies,” and “they must be implemented in the entire policy cycle, from tax codes and budget preparation or expenditure allocation, through to monitoring and evaluation of outcomes” [1]. Together with human rights, fiscal policy is governed by other legal frameworks such as domestic constitutional law, the general principles of international law, and public policy standards from international organizations, all of which should be interpreted in accordance with human rights norms.

With the adoption of the 2030 Sustainable Development Agenda and the Addis Ababa Action Agenda at the Third International Conference on Financing for Development, States committed to mobilizing resources and adapting their fiscal policies to achieve the Sustainable Development Goals. Human rights standards were acknowledged as the cornerstone of these agendas.

However, despite the huge transformative potential for realizing human rights, in reality fiscal policy is not being implemented according to the obligations of States in this area. This was recognized by the IACHR when it pointed to the persistence of several factors depriving states of valuable resources to guarantee human rights, including: the low generation of public resources owing to high levels of tax evasion and avoidance; generous tax incentives, exemptions and other legal loopholes; and the persistence of regressive tax structures, in which those who have more do not necessarily pay in proportion to their ability to pay, thus depriving states of valuable resources to guarantee human rights. In addition, social spending, which across the region is low by international standards and often lacks a human rights focus, is insufficient and unevenly distributed, according to the IACHR.

Furthermore, governments in the region often respond to economic crises without giving sufficient consideration to their human rights obligations, leading to the implementation of regressive and pro-cyclical measures. This is further exacerbated by the macroeconomic volatility and frequent crises arising in Latin America and the Caribbean.

Likewise, lack of transparency, participation and real democracy in the area of fiscal policy has led to elites’ and rent seekers’ capture of fiscal policy with the aim of strengthening their own privileges. Increasing privatization has also contributed to this trend. As corporations gain greater political power, they exercise undue influence to reduce corporate taxation, broaden tax allowances and exemptions, and increase legal loopholes enabling tax avoidance. These measures reduce tax progressiveness and equity, thus affecting the most disadvantaged and vulnerable groups in society and weakening the rule of law. At the same time, public administrations incur serious financial losses as a result, and the capacity of States to provide quality public services is limited.

This situation prevents the States in the region from resolving several of their main challenges. As the IACHR has warned, poverty cannot be addressed and eradicated unless there is a broad framework of redistributive policies, including fiscal policy, in order to reduce the extreme levels of socioeconomic inequality in Latin America. In some countries, people living in poverty are not even beneficiaries of the fiscal system but rather net payers.

Moreover, in the context of globalization, international cooperation on tax affairs has become essential so that States can combat tax evasion and avoidance and halt the “race to the bottom” in corporate tax rates. This cooperation would help them to generate the necessary resources to confront challenges such as extreme inequality, climate crisis, emergencies due to shocks such as the COVID-19 pandemic and forced migration, among other key issues of these times, when States need sound financing more than ever.

Human rights can provide a valuable contribution toward rethinking fiscal policy in the region in this context. These Principles and Guidelines on Human Rights and Fiscal Policy offer a clear normative framework for the application of human rights principles to the design, implementation and monitoring of fiscal policy. They put forward a set of benchmarks so that States, international financial institutions, multilateral institutions and public and private economic actors in general are in a position to comply with their fiscal obligations and responsibilities. In addition, State actors, as well as civil society and social movements, will have a clear standard for accountability and rights-claiming by means of fiscal policy.

These Principles and Guidelines are the result of a three-year participatory process of discussion and collective analysis of legal standards and policy guidelines for Latin America and the Caribbean, but they can be applied globally. This interdisciplinary process has included the participation of State representatives, think tanks, multilateral institutions, academia, civil society and social movements throughout the region, by means of regional and national consultations. A Committee of highly-respected fiscal policy and human rights experts from the region collaborated in the drafting and approval process.

The goals of this document are to: (1) move the issue of fiscal resources from the periphery to the core of the human rights agenda; (2) motivate national and regional supervisory and monitoring bodies to actively incorporate the impact of fiscal policies in their analysis of rights fulfilment; (3) position human rights standards as a central framework for designing fiscal policy in the region and through which civil society can demand changes in fiscal policies.

The Principles and Guidelines are structured as follows: The principles contain requirements from legal sources, in particular international law (including sources of “soft law”), and therefore they consist of actions that States must implement. These are further developed in sub-principles. Likewise, each principle is associated with a number of guidelines or action points outlining means of practical implementation.

The aim of the guidelines is to clarify the obligations of States and to guide public decision makers in fulfillling human rights norms. They derive from recommendations made by UN treaty bodies and the special procedures of the human rights system, from organizations specialized in fiscal matters and best practice in policy as evidenced by comparative experience. Given the need to use different sources of international law and, in some cases, policy recommendations by specialized organizations, not all the guidelines have full normative force. For this reason, they are articulated as action points that States should implement. A version with comments is available on the project’s website explaining in detail the legal sources and other secondary sources the Principles and Guidelines are based on.

 

[1] IACHR, 2017. Report on Poverty and Human Rights in the Americas. OEA/Ser.L/V/II.164. Doc. 147. Par. 501.

ACIJ- Asociacion Civil por la Igualdad y la Justicia
CELS-Centro de Estudios Legales y Sociales
CESR-Center For Economic and Social Rights
Dejusticia-Derecho Justicia Sociedad
Fundar-Centro de Análisis e Investigación
Inesc
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Principles of Human Rights in Fiscal Policy. ©2022