I just don't know what to say about this [from accountingtoday.com]

[michaelmars]

The report, released Tuesday by the London-based organization of international legal practitioners, bar associations and law societies at the IBA’s annual conference in Boston, argues that some tax strategies cross the line into “tax abuses” that may violate internationally accepted norms of human rights. Prepared by the IBA’s Human Rights Institute Task Force, the report contends that the actions of states that encourage or facilitate tax abuses, or that deliberately frustrate the efforts of other states to counter tax abuses, could constitute a violation of their international human rights obligations, particularly with respect to people’s economic, social and cultural rights.

The report, Tax Abuses, Poverty and Human Rights, asserts that tax practices contrary to the letter or spirit of international and domestic tax laws and policies have a significant negative impact on the realization of human rights in developing countries. Profits flowing out of developing countries can thus deprive governments of the resources that they need to alleviate poverty and uphold international human rights standards.

[Jack from Ohio]

The report, released Tuesday by the London-based organization of international legal practitioners, bar associations and law societies at the IBA’s annual conference in Boston, argues that some tax strategies cross the line into “tax abuses” that may violate internationally accepted norms of human rights. Prepared by the IBA’s Human Rights Institute Task Force, the report contends that the actions of states that encourage or facilitate tax abuses, or that deliberately frustrate the efforts of other states to counter tax abuses, could constitute a violation of their international human rights obligations, particularly with respect to people’s economic, social and cultural rights.

The report, Tax Abuses, Poverty and Human Rights, asserts that tax practices contrary to the letter or spirit of international and domestic tax laws and policies have a significant negative impact on the realization of human rights in developing countries. Profits flowing out of developing countries can thus deprive governments of the resources that they need to alleviate poverty and uphold international human rights standards.

[Mr. Pencil]

some tax strategies cross the line into “tax abuses” that may violate internationally accepted norms of human rights.

Interesting. Besides bank secrecy, questionable strategies include "transfer pricing and other cross-border intra-group transactions; the negotiation of tax holidays and incentives; the taxation of natural resources; and the use of offshore investment accounts." The idea is that such incentives deprive developing countries of the resources needed to provide basic human needs like food, health, education, and security. The problem has certainly been around since the days of Empire, but it has been receiving some intelligent analysis recently, notably at G8 and G20.

The report appeals to widely-accepted ethical norms. I would guess some readers would not understand the issue in terms of opinions expressed regarding the evils of government and the irrelevance of helping others.

[michaelmars]

its a very Global outlook that ties our taxes to other countries development.

[kcjenkins]

The headline of that article was

Tax Avoidance Seen as a Human Rights Violation

Interesting concept, huh? In this country we make a clear distinction between Avoidance [legal] and Evasion [illegal].

The report highlights concerns over the “morality” of sophisticated tax planning strategies, in which corporations and wealthy individuals end up paying little or no money in taxes. Among the types of tax behavior seen as potentially abusive are transfer pricing and other cross-border intra-group transactions, the negotiation of tax holidays and incentives, the taxation of natural resources and the use of offshore accounts.

“The fact that sophisticated tax planning strategies are technically legal is no longer a justification for their use,” said Yale University professor Thomas Pogge, who chairs the IBA Human Rights Institute Task Force. “The impact of tax abuses, facilitated by secrecy jurisdictions, on global poverty is tremendous. The international community has not only a legal obligation but also a moral duty to ensure that states use the maximum resources available to fulfill the civil, political, economic and social rights of citizens.”

The report urges states to implement international standards of transparency and information exchange in tax matters, and businesses to undertake due diligence measures and impact assessment of all operations, including tax planning strategies. Lawyers also need to balance their obligations to defend their clients’ interests with their responsibilities to uphold human rights in their practice, including with respect to tax planning strategies, the report argues.

“The legal profession has an important role to play in confronting the negative effects of tax abuses on human rights,” said Sternford Moyo, who co-chairs the IBA Human Rights Institute and is a member of the task force. “Lawyers have a duty to balance their obligation to their client’s interests with their obligations to uphold human rights and the rule of law.”

The report also takes note of the role of accountants, quoting one unnamed expert interviewed by the task force who observed, “Those who siphon funds out of developing countries can and should know that they are thereby actively diminishing funds that go to efforts to reduce poverty. And those who facilitate tax abuse (e.g., tax havens, secrecy jurisdictions, and certain lawyers and accountants) can and should know that their activities likewise take funds away from efforts to reduce poverty.”

So helping a client keep more of his own earning, by legal tax advice, is increasing poverty? I'm not buying that. You reduce poverty by increasing economic activity. When, for example, a company opens a plant in a poor country to take advantage of lower wages, that creates jobs in the poor country, improving opportunity for those workers to improve their own lives.

[taxxcpa]

Even if helping a client keep more of his own earning increases poverty,it would not be appropriate to cause someone to overpay his taxes to decrease poverty. If there is a problem, it should be handled by changing laws, not by failing to take advantage of existing laws.

[kcjenkins]

You are so right, Atticus. The entire tone of that report bothered me for that very reason.

[SaraEA]

Many developing nations have autocratic governments. There is no guarantee that tax collections and resource sharing will be used for citizens who live in poverty. In fact, they are very likely to be used for the benefit of government insiders and their friends instead of the governed. The IBA's statement addresses an ideal world, not the real one. Whether businesses pay the government their fair share or hide their wealth in off-shore havens probably doesn't make a lick of difference to the family who lives in a mud and thatch hut and spend their days in subsistence farming. They will never see the inside of a school or have enough to eat regardless of internal or international tax policies.

Alaska's Permanent Fund could be a model for all nations. The state collects a severance tax from businesses who exploit natural resources, e.g., oil, fish. These resources are considered to be owned by all state residents, and every year each of those residents gets a check for their share of the tax collected. Something like that could certainly help reduce poverty in resource-rich nations, but it more often goes to the chosen few. Think the old USSR shared a dime of the monies made from its oil wells with the peasants?

[Mr. Pencil]

Even if helping a client keep more of his own earning increases poverty,it would not be appropriate to cause someone to overpay his taxes to decrease poverty. If there is a problem, it should be handled by changing laws, not by failing to take advantage of existing laws.

The international legal association that sponsored this study is thinking on a different level. They point out that local tax laws exist in a broad environment of treaty and other obligations, both legal and ethical. They don't draw a line between "evasion" and "avoidance," but talk of abuses which "deprive governments of the resources required to provide the programmes that give effect to economic, social and cultural rights, and to create and strengthen the institutions that uphold civil and political rights." They make a compelling case. "Actions of states that encourage or facilitate tax abuses, or that deliberately frustrate the efforts of other states to counter tax abuses, could constitute a violation of their international human rights obligations, particularly with respect to economic, social and cultural rights."

But, again, I guess that some readers can't understand this if they have politics opposed to government regulation and religion opposed to helping others.

[taxxcpa]

I think almost everyone agrees that we need government regulations rather than anarchy and I know of no religion that opposes helping others. If someone chooses to overpay his tax to help others, no one objects, but he has no right to compel others to do the same. He does have the right to try to have laws changed, but unless he is a dictator or absolute monarch, there isn't any way that he can change the laws without convincing enough others to support his point of view.

Most of the abuses are the fault of the governments in poverty-stricken countries. The people who run those governments are not the ones that are poverty-stricken.

I think Judge Learned Hand said it best:

"Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands."

[Guest Taxed]

>>> Most of the abuses are the fault of the governments in poverty-stricken countries. The people who run those governments are not the ones that are poverty-stricken.

And guess where these third world leaders learned all that. The colonial powers showed them exactly how to do it. Just read your old history books.

[Catherine]

You are so right, Atticus. The entire tone of that report bothered me for that very reason.

The Declaration of Independence says it best: "...all men are created equal and are endowed by their Creator with certain unalienable (inseparable, inherent) Rights" and among these are life, liberty, and property (not in the first listing, but in the 2nd listing, a paragraph further down as well as in John Locke's 2nd Treatise on Government which has a much greater discussion of "property"). It goes on, "to secure these Rights, governments are instituted..."

The places where poverty is at its worst is places where property rights (starting with the first piece of property you own; your own body) are not respected and where the government, instead of protecting rights, instead acts as a much nastier version of a schoolyard tough taking everyone's lunch money and enforcing his rule with a bunch of bullies at his beck and call.

Changing our (or anyone's) taxation rules to further enrich those toughs will do absolutely *nothing* to reduce poverty in those countries. Start with respect for property, so the people have hope that working to better themselves will not make them targets of plunder. Work outward from there.

[kcjenkins]

" They don't draw a line between "evasion" and "avoidance," but talk of abuses which "deprive governments of the resources required to provide the programmes that give effect to economic, social and cultural rights, and to create and strengthen the institutions that uphold civil and political rights."

TRANSLATION: deprive those in control of tax money to use to control their populations.

Certainly we need government regulations rather than anarchy, there is no sane person who disagrees with that. However, there is a big difference between reasonable regulation and government trying to micro-manage the entire economy.

And I know of no "religion opposed to helping others.". Could you give us an example, Jainen?

[Mr. Pencil]

I know of no religion that opposes helping others.

Unfortunately, the Parable of the Good Samaritan is still very relevant. It is not hard to find religious arguments used to justify denying help to, for example, immigrants, sexually active teenagers, low-income workers, or homosexual couples,

[Jack from Ohio]

Unfortunately, the Parable of the Good Samaritan is still very relevant. It is not hard to find religious arguments used to justify denying help to, for example, immigrants, sexually active teenagers, low-income workers, or homosexual couples,

What "religious" groups have you been a part of, or interacted with personally that espouse the things you just said?

My life experience does not support your broad brush generalizations.

[kcjenkins]

Unfortunately, the Parable of the Good Samaritan is still very relevant. It is not hard to find religious arguments used to justify denying help to, for example, immigrants, sexually active teenagers, low-income workers, or homosexual couples,

While you can ALWAYS, IN EVERY RELIGION, find a few extremists who behave that way, that does not mean you should smear the whole religion because of a few nuts. Do you think that Westboro represents Christianity's attitude toward homosexuals, for example? Actually, while Christianity does not approve of it, very few churches close their doors to them, instead they accept them and pray for them. Christianity does not demand that church members be pure, indeed if that was the case there would be little need for churches.

Most churches in this country work hard to extend help to all who need help, supporting homes for pregnant women who need help, supporting food banks that help anyone who needs it, operating AA groups, etc. I find your argument against religion hard to understand. As I do you mention of "immigrants". I notice you make no distinction between illegal and legal immigrants? Do you believe nations have no right to control their borders? Or are you referring to how the tax code treats them?

[taxxcpa]

As Willie Shakespeare wrote: "The devil can cite Scripture for his purpose".

There are passages in the bible such as:

Slaves be ye faithful to your masters.

The poor ye shall have with ye always.

This could be used to justify slavery and poverty, few religions advocate slavery or poverty.

[Mr. Pencil]

that does not mean you should smear the whole religion because of a few nuts.

I was only talking about individuals. I never mentioned religious organizations, but if you insist I could point to many. One very large religion had an official policy of protecting church assets at the expense of victims of child abuse. Several countries have national religions that discriminate against minority beliefs in social and economic rights.

It shouldn't be controversial to observe that tax laws are sometimes inconsistent or conflict with other laws. That is talked about all the time in this very forum. For example, yesterday I explained a change in Section 162 for next year. It allows some taxpayers a much larger benefit, is of uncertain effect in prior years, and of course is still completely out of sync with GAAP.

We can pretty easily figure out how to advise our clients in terms of Form 1040 or 1120. But the study is looking at the international implications. Since 1980 the U.S. tax system has spurned international accounting standards by giving government benefits to companies that upgrade their equipment. Even within the U.S. that tax strategy has closed some factories, creating social and economic problems. And since those same companies may have factories overseas, such social and economic problems can run against our treaty obligations. From this thread it sounds like some people have not thought about that, so I'm glad michaelmars started this thread.

[taxxcpa]

I would agree that if someone starts a factory that violates a treaty, they should not do it. Whether we agree or disagree with the treaty is another matter.