A/HRC/26/28 61. It is important to note, however, that tax evasion is not possible in a domestic vacuum. Individual countries, in particular low-income countries, are severely constrained in the measures that they alone can take against tax abuse. Illicit financial flows are international in nature and therefore beyond the capacity of one State alone to tackle. The availability of offshore financial centres (tax havens) that offer low or no taxes and secrecy is a major factor. More than $21 trillion in private assets are reportedly held in tax havens to evade and avoid taxes.80 Tax havens enable large-scale tax abuse (as well as illicit activities, such as corruption) and deprive other countries of the revenue they need to fulfil their obligations. In addition, given that most tax havens are located in – or under the jurisdiction of – wealthy countries, the global flow of money to these centres exacerbates global inequalities.81 62. The actions of States to facilitate and/or actively promote tax abuse and other illicit financial flows through their tax secrecy laws and policies could jeopardize their compliance with international human rights obligations, particularly with regard to international cooperation and economic, social and cultural rights.82 States should therefore take concerted and coordinated measures against tax evasion globally as part of their domestic and extraterritorial human rights obligations and their duty to protect people from human rights violations by third parties, including business enterprises (see paras. 1 – 35 above). C. Reassessing corporate taxation contributions 63. In many countries, business enterprises are taxed at a very low rate, even if they make large profits, owing in large part to the infrastructure, healthy educated workforce and other resources that public funds enable. In addition, many large transnational corporations are able to effectively avoid tax in many jurisdictions, including in countries where they make large profits. 64. States increasingly grant tax incentives (or tax holidays) to corporations 83 as they compete to attract foreign investment.84 Many least developed countries, for example, offer extremely favourable tax deals to foreign investors in agriculture and mining owing to the perceived competition between countries for this investment.85 These incentives warrant a heightened level of scrutiny in human rights terms, because they restrict the State’s revenue and therefore the resources it is able to devote to rights realization. According to some estimates, revenue losses to developing countries can reach $138 billion per year. 86 80 81 82 83 84 85 86 16 James S. Henry, The Price of Offshore Revisited, Tax Justice Network, July 2012. See United States Government Accountability Office, International Taxation: Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions, December 2008, pp. 12-13. A/HRC/25/52, para. 42. Accord to IMF(Michael Keen and Mario Mansour, Revenue Mobilization in Sub-Saharan Africa: Challenges from Globalization, IMF Working Paper, 2009, p. 19), in sub-Saharan Africa between 1980 and 2005, the proportion of countries providing incentives rose from 45 to 69 per cent. Effective corporate tax rates have dropped close to or even below zero in many developing countries (S. M. Ali Abbas and Alexander Klemm, A Partial Race to the Bottom: Corporate Tax Developments in Emerging and Developing Economies, IMF Working Paper, 2012, p. 9). Supporting the Development of More Effective Taxation Systems: a report to the G-20 Development Working Group by the IMF, OECD, UN and World Bank, 2011. UNCTAD, Least Developed Countries Report 2013, p. 136. ActionAid, Give us a break: How big companies are getting tax-free deals, June 2013.