II.  Cross-cutting obligations applicable to fiscal policy (3-7)

 

3.1. Design tax policy in accordance with the principles of horizontal and vertical equity, legality, equality, non-discrimination, generality, ability to pay, progressiveness, and other principles generally incorporated in their own constitutions, stemming from the international human rights framework and other complementary frameworks.

3.2. Guarantee tax justice by ensuring the tax system promotes substantive equality and that all people comply with their duty to pay taxes in accordance with their ability to contribute. States must establish an appropriate tax threshold and refrain from adopting fiscal measures that impose burdens which unavoidably and manifestly worsen the situation of those who lack the necessary material resources to live with dignity and autonomy.

3.3. Ensure that their public spending policies are designed according to the principles of legality, efficiency, and priority in social spending, among other principles generally accepted in their own constitutions. Public assets must be protected and managed according to current legislation, with integrity and due diligence.  

3.4. Manage public debt so that it does not obstruct the improvement of conditions that guarantee the enjoyment of human rights. The management of public debt must conform with the principles of sovereignty, good faith, transparency, impartiality, sovereign immunity, legitimacy, sustainability, and respect decisions around majority restructuring, meaning that sovereign debt restructuring agreements that are approved by a qualified majority of the creditors of a State are not to be affected, jeopardized or otherwise impeded by other States or a non-representative minority of creditors.

 

Guidelines

Based on this principle States should:

1. Reduce inequalities.
Promote reduction of inequality with appropriate tax policies and social protection systems that have a considerable redistributive impact. To achieve this, States can start by self-diagnosing both the essential factors and the obstacles to achieving this objective in relation to their own resources (if the revenue and redistributive spending of the State are sufficient); equity (if the redistributive spending and the scope, design and implementation of programs is consistent with guaranteeing an adequate living standard); quality (if the design and implementation of such programs are consistent with micro- and macroeconomic efficiency, are profitable, generate social benefits and are of good quality); and accountability (if such programs are transparent and accountable).

Implement strategies that improve the collection of public revenue, avoid the imposition of high tax rates on goods and services and low rates on income, wealth. and property, all which undermine the contribution of tax systems to inequality reduction. 

2. Ensure progressiveness in fiscal policy as a whole.
Ensure that fiscal policy as a whole is progressive. 

3. Ensure progressiveness in the tax structure.
As a maximum priority, correct the high dependency on regressive taxes with low distributive impact, and other regressive biases of tax systems, to prevent cancelling out the progressive effect of transfers. Nevertheless, they shall exceptionally maintaining such taxes when they stimulate or deter conducts to promote and protect human rights). Take advantage of the potential of progressive taxation, by incorporating lessons learned internationally in appropriate tax collection and auditing.

4. Guarantee progressiveness in the design of specific taxes.
Guarantee that the main sources of income for the population at the top of the distribution chain–including dividends and other sources of capital–are taxed at rates similar to or higher than other sources. 

5. Promote universality of rights and progressiveness of spending.
Promote progressive social spending, which should in no way be interpreted as a justification for dismantling universal social policies, considering that human rights must be ensured for all the population; nor as excluding spending that does not have an immediate distributive effect, such as the payment of salaries of medical and educational professionals, which reduces social inequality. Targeted policies cannot justify the violation or deprivation of rights nor deny their general application. 

6. Guarantee equity among different types of businesses. Guarantee fair treatment in taxation among different types of companies (multinationals, national business conglomerates and small and medium-sized enterprises), in line with national development goals. To tackle tax avoidance practices, there must be clear criteria of control of a legal entity and beneficial ownership of small companies by larger conglomerates. This includes shareholding, administrative control, shared use of marketing activities and other general services, among other areas. 

7. Carefully consider decisions relating to the privatization of public assets. Ensure that these decisions are made on the basis of cost-benefit criteria in which the public interest prevails. Specifically, measures must be adopted to guarantee the people’s right to participate in the assessment of the adequacy of the private provision of public goods or services. Privatization should not result in the enjoyment of rights “conditioned on the ability to pay” nor should it affect the scope of availability, accessibility, adaptability, and acceptability in the provision of goods and services. In areas such as water and electricity supply, education and health services, areas in which the public sector has traditionally been prominent, private suppliers must be subject to strict regulations. Consider assessing in privatization processes how and where the affiliated companies will be located, in particular if they are located in tax havens, and demand public country-by-country reports for all the companies that have been privatized, regardless of whether they are head offices or if they fulfill the minimum threshold established by local law. 

8. Incorporate a human rights focus in debt management. States must consider the financing required for complying with human rights obligations and achieving the Sustainable Development Goals (SDGs) in their debt sustainability assessment frameworks, and make steps toward the orderly and equitable restructuring of debt servicing when it compromises the fulfillment of said obligations.

   

 

States must:

4.1. Use fiscal policy to its maximum potential to prevent, mitigate, and adapt to climate change.

4.2. Ensure that fiscal policy is congruent with environmental policies at the national and global levels and is in accordance with these policies, recognizing the interdependence between human rights and a healthy environment.

4.3. Consider carefully decisions on natural resource extraction, taking into account environmental concerns and the rights of future generations, and respecting the rights of the whole population. These decisions must be legitimate, sustainable, and acceptable for all people, whereby the public benefits must exceed the costs and be equitably distributed. States must ensure that investors’ rights do not undermine the State’s obligation to protect, respect and fulfill rights. 

 

Guidelines

Based on this principle States should:

1. Ensure sustainability. Reduce the dependency of their economies on extractive industries, in particular those related to the exploitation of fossil fuels, so that the income deriving from exploiting these resources is reduced.

• Ensure that fiscal policy is sustainable intergenerationally (including demographic considerations and compensatory mechanisms for future generations) and balanced in terms of sharing the costs and benefits on the territorial level, in ways that support regional convergence.
• Ensure that, when natural resource exploitation is permitted and directly undertaken, a reasonable part of the profits is subject to taxation and assigned to fulfilling human rights, particularly of the population living in the territories where the exploitation is taking place.
• Establish mechanisms so that the State acquires part of the resources from extraordinary profits resulting from price increases.   

2. Coordinate policies. Coordinate economic, environmental, and social policies, and undertake institutional amendments so that environmental institutions and authorities are on an equal footing regarding decision making and policy design.

3. Create incentives. By means of fiscal policy, stimulate investment in renewable energy, the creation of quality green jobs, and the reduction of greenhouse gas emissions.

4. Incorporate taxes and other green fiscal instruments. Incorporate or broaden green and environmental taxes, in which the tax base has a negative effect on the environment, such as taxes on energy, coal and carbon dioxide, pollution (for example, air and water emissions), and the use and extraction of resources and materials.

Use the revenue from these taxes, or part of it, to finance environmental management and investment.

5. Gradually dismantle subsidies for fossil fuels. Dismantle the fiscal incentives for non-renewable sources of energy in accordance with other principles and ensure protection and compensation for lower-income populations.

 

 

States must:

5.1. Take fiscal measures that contribute to eradicating structural and intersectional inequalities, including ethnic, racial, territorial, and other types of inequalities. They must mobilize resources and allocate and execute public funds equitably thus helping to achieve substantive equality.

5.2. Refrain from adopting differential and unjustified fiscal treatment that is not reasonable and proportional in order to achieve a legitimate purpose. An implicit tax bias, unjustified tax incentive or inadequate resource allocation could give rise to indirect discrimination. States must take special measures aimed at improving the situation of disadvantaged people and groups, such as subsidies and fiscal exemptions.

5.3. Assess the different consequences of current fiscal policy and reform proposals on different social groups, considering the direct and indirect discriminatory effects and, if necessary, adopt alternative measures.

5.4. States cannot excuse their incapacity to eliminate differential treatment by alleging lack of resources, unless they can prove they have used all available resources in an effort to address and end the discrimination as a matter of priority. Even in times of resource restriction, States must protect the most vulnerable groups with low-cost programs.

5.5. Give primary consideration in all stages of the budgeting process, and in all budgetary decisions that might affect them, to groups which require special attention or who are historically discriminated against, such as children, Indigenous and Afro-descendant communities, persons with disabilities, and other groups.

 

Guidelines

Based on this principle States should:

1. Overcome the statistical invisibility in fiscal matters of populations facing structural discrimination.
Incorporate indicators that enable the identification of the impact of fiscal policy on these groups.

2. Correct the implicit and explicit biases in the tax systems against specific groups.

3. Review unfair budgetary allocations.
Address imbalances in the budgetary allocations for marginalized groups and groups that have been traditionally underserved; prioritize and allocate additional resources to such groups to eliminate different kinds of disparities, and to combat territorial and other types of disparities.

4. Adopt an ethnic and racial focus in their fiscal policies.
Incorporate the interests of Indigenous, Afro-descendant and peasant communities in fiscal policy by preserving and strengthening their respective economies.

 

 

States must:

6.1. Use fiscal policy to contribute to eliminating existing gender discriminations and gaps.

6.2. Ensure that their fiscal policy promotes substantive gender equality, eliminates gender discrimination in fiscal structures and corrects gender biases (explicit and implicit) in tax systems.

6.3. Adopt budgets with a gender focus.

6.4. Ensure there is a gender sensitive (rather than gender “neutral”) focus in tax matters that enables advancement towards gender equity. 

6.5. Ensure the participation of women in the processes of elaboration, execution, and monitoring of fiscal policy.

 

Guidelines

Based on this principle States should:

1. Incorporate a gender focus in their tax policy.

2. Implement budgets with a gender focus. Make available disaggregated data to assess the impact of the budget on women and men, and design public financial management systems in order to maximize the outcomes in terms of gender equality.

3. Prioritize investment that promotes gender equity. Increase economic opportunities for women through public spending; promote equal access to productive resources; and meet their social, educational and health needs, in particular those of women living in poverty.

• Ensure public investment in caring for people–children, elderly and people with disabilities–and the recognition of unpaid domestic and care work through public services, infrastructure, and social protection policies, promoting shared responsibility in the home and family.

 

States must:

7.1. Take measures to strengthen fiscal morale and the active exercise of fiscal citizenship.

7.2. Make tax information public and give access to all fiscal information; this information must be structured clearly and comprehensibly and be made available for consultation by the general society. States must ensure that tax and budgetary information allows for classification and disaggregation criteria that enable fiscal policy to be monitored with a rights perspective.

7.3. Regularly adapt legislation on the fiscal and financial information required from multinational companies, intermediaries and other actors so it meets minimum international standards.

7.4. Strictly justify any limitations to the right to fiscal information for reasons of general interest, and guarantee that those limitations can be challenged before impartial authorities.

7.5. Ensure that fiscal policy decision-making processes are open to a public debate informed by inclusive, broad, transparent and deliberative social dialogue processes, based on evidence and using language accessible to the public. Participation must be equitable, comprehensive, significant, and multisectoral, and States must implement inclusive and appropriate mechanisms of participation.

 

Guidelines

Based on this principle, States should:

1. Produce and give the broadest possible access to quality fiscal information.
Establish a presumption of the public availability of fiscal information, with limited exceptions, stipulated in the legal framework.

• Publish clear and measurable objectives for fiscal policy (including goals of collection and progressiveness), and regularly carry out an overall evaluation of the progress made and explain any deviation from what was planned.
• Provide disaggregated information and data that is reliable, timely, accessible and complete, and in a reusable format, relating to the macroeconomic context, the budget, etc. 

2. Participatory and responsible budgets.
Create a procedure for drafting the budget that facilitates substantial contributions from all interested parties, including civil society, and adopt participatory budgeting at the local level. 

3. Monitor public spending and strengthen audit institutions.
Supervise, assess and audit public funds to provide robust financial management.

• Assess the effectiveness, adequacy and equity of resource distribution for human rights, with effective supervisory and control mechanisms, particularly at the local and regional levels.
• Undertake audits, assessments and impact studies on certain groups, which are open to public scrutiny.
• Hold consultations with interested parties and duly take into account the results of those consultations, and use new technologies to improve the effectiveness of budgetary planning.  
•  Legislative bodies in particular should exercise their supervisory function and proactively inform the electorate of the objectives and consequences of fiscal policy.

 

4. Promote fiscal education.
Stimulate the capacities and promotion of fiscal education and give access to all the relevant information in an accessible and understandable format in order to generate greater awareness of how taxes benefit society.  

• Promote educational and awareness-raising initiatives on the process of making budgetary decisions and their impacts.
• Formally define the role of civil society in fiscal policy processes, including in high-level debates, providing organizations with the necessary knowledge to participate.
• Adopt specific measures to guarantee equality of access and opportunities to participate in fiscal policy processes, above all for people living in poverty.

 

5. Gather information from corporations.
Establish legal and institutional mechanisms for publishing corporate fiscal information.

• Comply with the OECD Base Erosion and Profit Sharing (BEPS) agenda, at a minimum, in terms of transparency and in particular the minimum standard of automatic information exchange relating to the activities of multinational corporations; constantly update legislation and institutional practices to meet new standards in this area.
• Request all transnational corporations to provide country-by-country reports on the number of employees working for them directly and indirectly; their capital, income, profits and taxes paid, in each jurisdiction in which they operate. These reports should be public, at least for some sectors such as banking. When minimum turnover thresholds are established for requiring these reports, they must be in accordance with the economic reality of each country so that the requirement is not distorted.

6. Limit financial secrecy.
Limit fiscal secrecy and undertake independent, participatory and regular impact studies on the extraterritorial effects of their financial secrecy policies, indicating their methodology.

7. Make visible the tax burden and the budget allocated to excluded populations. 

8. Scrutinize public spending and fiscal fraud.
Make public the cost of public and social services, and the consequences and material cost of fiscal fraud, in order to improve fiscal morale.

9. Carry out human rights impact assessments.
Carry out human rights impact assessments of fiscal policy. Assessments must be:

• comprehensive, with the participation of social actors, and including, among other things, an analysis of the distributive consequences and the tax burden on different sectors, as well as on marginalized and disadvantaged groups, and the negative effects in other countries.
• regular, informed and transparent.
• subject to independent verification, with public participation in the definition of the risks and potential extraterritorial impacts.
• Assessments must have a gender perspective and consider the possibility of adopting alternative policies that avoid, or at least, reduce and correct the possible adverse effects.

Should also include loans and public debt, first to determine if they are really necessary, and to ensure that additional funds cannot be acquired by redirecting current budgetary allocations.