Report on Corporate Tax Practices and Sustainable Development Goals

Introduction: The Nexus of Corporate Taxation, Human Rights, and Sustainable Development

Abusive tax practices by multinational corporations represent a significant barrier to the realization of human rights and the achievement of the 2030 Agenda for Sustainable Development. By eroding the tax base of nations, these practices deplete the public revenues essential for funding services that underpin numerous Sustainable Development Goals (SDGs). Despite this direct impact, the issue of corporate tax abuse has been largely omitted from the operational framework of the United Nations Guiding Principles on Business and Human Rights (UNGPs).

Impact on Sustainable Development Goals

The failure to address corporate tax abuse directly undermines progress on several key SDGs:

• SDG 1 (No Poverty) & SDG 10 (Reduced Inequalities): Lost tax revenue curtails government capacity to fund social safety nets and public services, exacerbating poverty and widening the gap between the rich and poor.
• SDG 3 (Good Health and Well-being) & SDG 4 (Quality Education): Reduced national budgets directly impede investment in universal healthcare and accessible, quality education systems.
• SDG 16 (Peace, Justice and Strong Institutions): Tax abuse weakens state institutions, erodes public trust, and undermines the rule of law, which are foundational for peaceful and just societies.
• SDG 17 (Partnerships for the Goals): Effective domestic resource mobilization, a key target of SDG 17, is rendered unattainable when corporate tax avoidance and evasion go unchecked.

Analysis from New Research: “Corporate Tax Abuse: the elephant in the room of business and human rights”

A new film and associated briefing highlight the urgent need to address this policy gap. The research demonstrates how taxation must be a central component in the implementation of the UNGPs for both state and corporate actors. Key recommendations include:

1. Governments must integrate human rights and SDG considerations into the design and implementation of all taxation policies.
2. International taxation agreements must be negotiated with a clear focus on protecting the domestic resource mobilization capacity required to achieve the SDGs.
3. Business actors must align their tax planning strategies with their responsibility to respect human rights, ensuring their financial practices support, rather than hinder, sustainable development.

Case Studies: Ireland and Kenya

The report features case studies of Ireland and Kenya, two nations that have championed the Business and Human Rights agenda. The analysis examines how their approaches to taxation impact their ability to meet SDG commitments. The studies focus on:

• The incorporation of human rights and SDG standards into national tax policy frameworks.
• The human rights implications of international tax agreements negotiated by both countries.
• The responsibility of corporations operating in these jurisdictions to adopt tax practices that contribute positively to public finance and the fulfillment of the SDGs.

Analysis of Sustainable Development Goals (SDGs) in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice and Strong Institutions: The article’s central theme of “abusive tax practices” by corporations directly relates to the need for strong, transparent, and accountable institutions. It calls for better implementation of “taxation policies” and “international taxation agreements” to combat illicit financial flows, which is a core component of this goal.
• SDG 17: Partnerships for the Goals: The article discusses the roles and responsibilities of “governments” and “private sector entities” (multinational corporations) in addressing tax abuse. It highlights the need for coherent international tax agreements and domestic resource mobilization, which are key aspects of strengthening global partnerships for sustainable development.
• SDG 10: Reduced Inequalities: Corporate tax abuse reduces the public funds available for social services, which disproportionately harms the most vulnerable populations and exacerbates inequalities both within and among countries. The article’s call to reform “taxation policies” is a direct call to use fiscal policy to reduce inequality.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 16: Peace, Justice and Strong Institutions

   • Target 16.4: By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime. The “abusive tax practices” described in the article are a form of illicit financial flow, as they involve moving money out of countries to avoid taxation, thereby depriving them of revenue.
   • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article’s call for incorporating human rights standards into the “design and implementation of taxation policies” by governments points directly to the need for more effective and accountable public institutions.

2. SDG 17: Partnerships for the Goals

   • Target 17.1: Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection. The article’s focus on corporate tax abuse highlights how these practices undermine the ability of countries like Kenya to mobilize domestic resources through taxation.
   • Target 17.13: Enhance global macroeconomic stability, including through policy coordination and policy coherence. The reference to the need for better “negotiation of international taxation agreements” speaks to this target, as uncoordinated tax policies allow corporations to exploit loopholes.

3. SDG 10: Reduced Inequalities

   • Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality. The article advocates for changes in “taxation policies,” which are a primary fiscal tool governments can use to fund social programs and reduce economic inequality.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

The article does not mention any specific, official SDG indicators. However, it implies areas where measurement is necessary to track progress on the issues discussed. The following indicators are implied by the article’s focus:

1. For SDG 16:

   • Implied Indicator for Target 16.4: The total value of illicit financial flows, specifically measured as the amount of national tax revenue lost due to corporate tax avoidance schemes.
   • Implied Indicator for Target 16.6: The existence and enforcement of national and international policies that integrate human rights standards into corporate tax law and international tax agreements.

2. For SDG 17:

   • Implied Indicator for Target 17.1: The total government revenue as a proportion of GDP, and specifically the share of corporate income tax in that revenue. A decrease in this share due to abusive practices would indicate a lack of progress.

3. For SDG 10:

   • Implied Indicator for Target 10.4: The redistributive impact of fiscal policy, which could be measured by analyzing how changes in corporate tax collection affect government spending on social protection and public services that benefit lower-income groups.

4. Summary Table of SDGs, Targets, and Indicators

Source: taxjustice.net