Connect with us

By Megan Isaac, Research and Policy Intern

Billions of pounds are lost to tax abuse in the UK each year, remaining in the pockets of multinational corporations and wealthy individuals. If properly taxed, this wealth could reverse austerity cuts, soften the cost-of-living crisis, and support those at the sharpest end of inequality and discrimination, whose everyday human rights are left unfulfilled. The fight for human rights is therefore a fight for tax justice. 

Tax injustice is a human rights issue

Economic, social, and cultural rights have often been seen as subordinate to other human rights – as unattainable and unaffordable ideals. But the failure to fulfil these rights is not inevitable. It is a political choice.

As reported by the Tax Justice Network, in 2021, over $52 billion was lost to tax abuse by multinational corporations and wealthy individuals in the UK. This is equivalent to losing a nurse’s salary every 25 seconds. 

This is a human rights issue. The UK Government has a legal obligation to respect, protect, and fulfil the rights enshrined in the International Covenant on Economic, Social and Cultural Rights (ICESCR), which it ratified in 1976. This includes our everyday human rights such as the right to food, housing, education, and social security. But across the UK, these rights are left unfulfilled, and people are suffering as a result. 

A key element of ICESCR is the principle of progressive realisation, according to which States must take measures to the maximum of their available resources with the aim of achieving, progressively, the full realisation of economic, social, and cultural rights. But with billions of pounds lost to tax abuse each year, it is clear the UK Government is not committing  maximum available resources to the realisation of these rights.

In March 2023, the United Nations Committee on Economic, Social and Cultural Rights (UN CESCR) addressed tax injustice for the first time in a ‘list of issues’, calling on the UK Government to provide further information on measures taken to reduce tax avoidance and illicit financial flows. This is a positive development and highlights the extent to which tax justice is required to fulfil economic, social, and cultural rights. But much remains to be done.  

The tax system perpetuates inequality – but this can change 

Austerity, Covid-19, and the cost-of-living crisis have compounded inequality and disadvantage, leaving many in the UK struggling to survive. But amid these compounding crises, the richest 1 per cent have got richer. In the UK, income inequality has increased significantly  since 1979, more than in most OECD countries. But the growing economic dividing line in the UK is wealth. The scale of inequality is stark, with the richest 1 per cent of Britons holding more wealth than the bottom 70 per cent.  

A bar chart depicting the unequal distribution of wealth in Great Britain. The top 1% has a median household wealth of over £4 million, whereas the bottom decile has a median household wealth of less than £10,000

The tax system plays an important role in this. Only last month, Rishi Sunak’s tax return revealed that he paid an effective tax rate of 22 per cent on £2 million of earnings – the same tax rate as a paramedic earning £37,000 per year. The fact that income from wealth is taxed at a lower rate than income from work is one of the major flaws of the UK tax system. But this can change. Support for higher wealth taxes is on the rise, and introducing a 2 per cent wealth tax on people with assets over £10 million could raise £22 billion per year, whilst only affecting 0.04 per cent of the population in the UK. This revenue could go a long way towards realising economic, social, and cultural rights in the UK. 

The UK needs to clamp down on tax abuse

But tax justice goes much further than just wealth taxes. Tax abuse by wealthy individuals and multinational corporations shifting their profits to tax havens with extremely low tax rates significantly reduces the amount of tax they pay in the UK and therefore imposes further cuts on the UK budget. Whilst tax avoidance is a global problem requiring global solutions, the UK is at the heart of it, facilitating around one third of global corporate tax abuse through its network of Overseas Territories and Crown Dependencies. The profit shifting and illicit financial flows facilitated by the UK spider’s web therefore not only harms the UK but undermines the realisation of human rights globally. 

The vast sums of untaxed wealth which are routed through the UK’s financial system could instead contribute towards increasing the minimum wage, ensuring that no one must rely on foodbanks, funding the NHS, and building affordable housing. 

Tax injustice disproportionately impacts the most vulnerable

Tax injustice also intersects with other axes of discrimination. The existing tax structure perpetuates the racial wealth gap in the UK and cuts to public services and social security have a disproportionate impact on marginalised groups including women and disabled people. The fight for human rights is therefore a fight for tax justice. Tax policy should not be an area reserved for a privileged elite, it must be recognised that appropriate levels of tax are an essential tool for realising justice, fairness, and equality. 

What next? Learning from the intersection of tax justice and human rights 

Progressive tax reforms offer a strong financial basis for the realisation of economic, social, and cultural rights, providing a powerful rebuttal to the charge that these rights are unaffordable. But reforming the tax system and raising revenue is not enough. The tax justice movement requires a human rights framework to ensure that revenue is raised and spent in a way that respects everyone’s fundamental rights. The incorporation of economic, social, and cultural rights into domestic law would go a long way towards this goal and prevent the UK Government from eroding the protections afforded to those at the sharpest end of inequality and discrimination for the benefit of those at the top. The links are already being made, but a united front drawing on both tax justice and human rights is needed to tackle the crises faced in the UK today.

Background image by Ilian Iliev