Tax avoidance is a topic of children’s rights – guide for expats to Switzerland
The UN Committee on the Rights of the Child should ask Switzerland to report on the extraterritorial effects of its tax policy, argues international law professor Alexandra Dufresne.
The response to the Pandora, Paradise, and Panama Papers has focused more on the threat of tax avoidance and a lack of visibility into governments’ ability to fight corruption, ensure tax justice and prevent money laundering. What is largely missing from the debate is recognition of the direct impact of tax avoidance on children’s human rights.
Tax avoidance is essentially a matter of children’s rights. Children are disproportionately harmed by tax avoidance, which is facilitated by jurisdictions with weak transparency standards. The realization of their most important rights – the right to education, health care, food, shelter, nonviolence and a sustainable environment – depends on the ability of their home state to raise sufficient tax revenues. While adults can influence tax and budget priorities through voting or public office, children are not free to do so.
Furthermore, the countries where children are most severely harmed by inadequate income, especially countries in the Global South, are not the same as those who benefit most from serving as “tax havens” for multinational corporations and wealthy individuals and families, especially states in the Global North. The ability to “externalize” the cost of tax avoidance policies on “other people’s children”, especially children in low income Countries, makes reforms in this area very difficult.
Last month, the United Nations Committee on the Rights of the Child (CRC) has reviewed Switzerland’s human rights record with regard to children. Although the CRC expressed concern on violence and discrimination against groups of children at risk, nationwide well done in relation to children in their own territory.
But what about the extraterritorial effects of Swiss tax and financial policy on children abroad, for example through theirs negative effects on the capabilities of states to achieve sustainable development goals such as good health, quality education, gender equality, and clean water and sanitation? A loophole in the review process of the CRC is that external effects – in this case the negative effects that children (especially in the global South) bear due to the tax and financial transparency policy of a reporting state – are not yet consistently taken into account. In his Review September 2021 and be October 2021 final remarks, the CRC has neither investigated nor mentioned these issues.
In contrast, the CRC is recently asked Ireland Describe measures “to ensure that tax policy does not contribute to tax abuse by companies operating in other countries, which has a negative impact on the availability of resources for the realization of children’s rights in these countries”. This is an excellent precedent. The CRC should also ask Switzerland to do so in its next periodic report due in March 2026.
The need for more transparency
It is estimated that tax havens hold 10% of the world’s total GDP. Despite recent reforms, Switzerland is recognized by the Tax Justice Network as the fifth largest tax haven, responsible for $ 12.8 billion in lost revenue to other countries. (Ireland is 11th place). While it is only hosting 11% of the world’s population, Switzerland is responsible for 5.1% of global tax avoidance losses. It also ranks third in the world for the financial secret. Efforts in Parliament last spring to close some of the loopholes failed.
There is a precedent for recognizing the extraterritorial impact of Swiss tax and financial transparency policy on human rights. In 2016 under pressure from NGOs and academic institutions, Switzerland was asked by the Committee on the Elimination of All Discrimination Against Women (CEDAW), rate and report publicly the extraterritorial effects of financial secrecy and corporate tax policy on women’s rights. CEDAW encouraged these periodic assessments to independent, participatory and impartial.
But the subject has not yet received the attention it deserves.
The main reason for this is the lack of transparency itself. The intricate web of guidelines that enable wealthy individuals and companies to hide their assets is complicated and opaque. As the Pandora, Paradise and Pentagon Papers scandals show – which only came to light after data breaches – the rules of financial secrecy make it difficult to get an idea of how much money is at stake or where it is going. Financial services advisors and tax authorities are involved in a game of cat and mouse where innovative wealth hiding strategies evolve faster than the authorities’ ability to update their laws and regulations.
In addition, understanding and investigating these transactions often falls outside the training and expertise of child rights experts and attorneys, who often have backgrounds in psychology, social work, health, education, and children’s rights, rather than tax and finance law and policy. Corporate and human rights initiatives tend to focus on issues except tax avoidance.
For this reason, it makes sense for governments to calculate and report on the cost of their policies. Governments are the ones who have access to the relevant information. In order to avoid unnecessary research efforts, the SFB could start with the a handful of jurisdictions most directly responsible for the majority of tax avoidance, including Switzerland, report something. The CRC could model its reporting requests to its 2020 requests to Ireland as well as to the 2016 request from CEDAW to Switzerland, which explicitly mentions the extraterritorial effects of financial secrecy and tax policy.
Since a significant portion of tax avoidance is committed by very wealthy individuals and families, the CRC should consider adding tax avoidance by individuals. Perhaps most importantly, the CRC should ask Switzerland and other relevant countries to prepare concrete impact assessments based on current data and specific measures. This would reduce the risk that contracting states would avoid serious data-based analysis and attempt to “answer” these inquiries with reference to a general report on economic and human rights principles, as Switzerland does in theirs CEDAW submission 2020.
Like Ireland and other tax havens, Switzerland must take into account the cost of its domestic tax and financial transparency policies for children abroad. Measuring and reporting these costs publicly is the first step.
The views expressed in this article are solely those of the author and do not necessarily reflect the views of SWI swissinfo.ch.