insulate them from future changes in the domestic tax rates for an extended period of time. These types of agreement should also be examined with caution under human rights law, because they reduce public resources regardless of the evolving impact on human rights.” (para. 66) The length of incentives and the form –a “tax stability agreement” – are elements to take into account in evaluating their restrictiveness. Since the financing needs to comply with human rights obligations are harder to determine the longer the time horizon in question, agreements to freeze tax rates could run counter to the Guiding Principle on Business and Human Rights that requires states to “maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with business enterprises, for instance through investment treaties or contracts.”6 Taxes on the financial sector “Low tax demands of the financial sector . . . may therefore be indicative of a State’s unwillingness (rather than inability) to use its maximum available resources. . . . Taxes on certain types of financial transactions have been introduced in various jurisdictions (including in India, Peru, South Korea and Sweden) as a way to raise revenue from the financial sector as well as to deter speculative trading activities that generate risks for the whole of society (in the form of crises or fluctuations in food/fuel prices). This measure could also enable States to better comply with several human rights obligations, in particular those regarding economic, social and cultural rights.”(para. 69) Natural resource taxes “A State allowing or directly undertaking exploitation of natural resources without ensuring that a fair share of the proceeds are taxed and/ or allocated towards fulfilling human rights could be an indication of a failure to mobilize adequate resources.” (para. 72) “Natural resources can be a vital source of revenue that the State can use to comply with its human rights obligations. The financial and social benefits of natural resource exploitation are, however, increasingly bypassing people in producing countries.” (para. 70) (See Box 1) “[T]he rightful benefits in terms of revenue often go abroad (sometimes to tax havens), aided by the fact that extractive industries are often not required to disclose their profits on a projectby-project basis. The public revenue generated through taxes on the sector remains well below potential; the revenue secured by many resourcerich countries is very low in relation to the value of exports.” (para. 71) Contractionary macroeconomic policies (crisis prevention and response) “Even during times of severe resource constraints, States must demonstrate that every effort has been made to use all resources that are at its disposal, including resources that could potentially be collected through taxation, or tackling tax evasion and other illicit financial flows, in an effort to satisfy, as a matter of priority, minimum essential levels.” (para. 27) A close examination of tax policies becomes all the more relevant in times when there is pressure to curtail enjoyment of economic and social rights due to budgetary shortfalls, such as in crisis situations. “Meanwhile, the recent devastating austerity measures taken in some countries could have been avoided entirely if some of the annual revenue lost from tax evasion had been recovered.” (para. 59) “The compatibility of, for example, austerity measures (such as those that many States implemented in the wake of the 2008/09 financial crisis) with the Covenant would therefore depend partly on whether the State has sought revenue-raising alternatives before making cuts in areas that are important for ensuring the enjoyment of economic, social and cultural rights, such as cuts in public sector employment, public services or social protection.” (para. 28) Tax abuse “A State that does not take strong measures to tackle tax abuse cannot be said to be devoting the While tax evasion is a universal phenomenon, developing countries face proportionally greater challenges stopping it.