A/HRC/26/28 B. Tackling tax abuse 58. Tax abuse includes tax evasion, fraud and other illegal practices, including the tax losses resulting from other illicit financial flows, such as bribery, corruption and money laundering. 72 Levels of tax evasion are extremely high in many countries; 73 globally, approximately $3 trillion of government revenue is lost to tax evasion every year.74 While high-income countries are the biggest losers in absolute terms, low- and middle-income countries are particularly affected by the losses, and also face particular constraints when tackling tax abuse. 75 In 2011, developing countries lost $946.7 billion owing to illicit financial flows (a substantial portion of which relates to tax abuse),76 according to OECD more than seven times official development assistance for that year, and substantially more than the estimated costs of achieving the Millennium Development Goals.77 59. Tax abuse is thus not a victimless practice; it limits resources that could be spent on reducing poverty and realizing human rights, and perpetuates vast income inequality. While the rich benefit from this practice, the poor feel the negative impact on their standard of living, their unequal political power and the inferior quality of health and education services for themselves and their children. Simulations suggest that, if all the capital flight from Africa over the period 2000-2008 had been invested in Africa, with the same productivity as actual investment, the average rate of poverty reduction would have been 4 to 6 percentage points higher per year. 78 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.79 60. A State that does not take strong measures to tackle tax abuse cannot be said to be devoting the maximum available resources to the realization of economic, social and cultural rights. Moreover, high levels of tax abuse undermine the principles of equality and non-discrimination, given that evaders end up paying less than taxpayers with the same – or less – capacity to pay. High net-worth individuals and large corporations also have a far greater ability to evade taxes as they are able to pay tax advisers, lawyers and accountants (who may sometimes provide inappropriate advice and assistance) and to open undeclared foreign bank accounts in low-tax jurisdictions. Tax abuse by corporations and high networth individuals forces Governments to raise revenue from other sources: often regressive taxes, the burden of which falls hardest on the poor. Therefore, if States do not tackle tax abuse, they are likely to be disproportionately benefiting wealthy individuals to the detriment of the most disadvantaged. Monitoring, preventing and punishing abuse is therefore essential in order to comply with human rights principles and improve the distributive effects of tax systems. 72 73 74 75 76 77 78 79 Human Rights Institute Task Force on Illicit Financial Flows, Poverty and Human Rights, International Bar Association, Tax Abuses, Poverty and Human Rights, October 2013. According to the Inter-American Development Bank (More Than Revenue, 2013, p. 22), evasion rates of personal and corporate income taxes average about 50 per cent in 10 Latin American countries. “The Cost of Tax Abuse”, Briefing paper on the cost of tax evasion worldwide, Tax Justice Network, November 2011. Ibid. See Dev Kar and Brian LeBlanc, Illicit Financial Flows from Developing Countries: 2002-2011, Global Financial Integrity, 2013. See Shantayanan Devarajan, Margaret J. Miller and Eric V. Swanson, “Development Goals: History, Prospects and Costs”, World Bank Policy Research working paper summary. Tax Justice Network Africa and Christian Aid, Africa Rising? (see footnote 49), p. 28. See Ortiz and Cummins, The Age of Austerity, Initiative for Policy Dialogue and the South Centre, working paper, 2013 p. 29; Center for Economic and Social Rights, Spain factsheet, 2012, p. 7. 15