States have an extraterritorial obligation to ensure that fiscal law and policy respect and protect the human rights of people beyond their borders and to contribute to the creation of an enabling international environment and refrain from exerting undue influence on other States in ways that undermine their ability to fulfil their human rights obligations .
Multilateral measures are in place to provide specific guidelines on international tax cooperation. Some of those guidelines include, but are not limited to, combatting tax-related illicit financial flows, refraining from facilitating tax abuse, promoting international tax competition and supporting reforms to promote more equitable international tax governance norms and institutions. There are also other initiatives, including the creation of a global tax body that “would allow all countries to have an equal say in the setting of standards and decision-making on issues related to tax matters” .
In 2014, the High-level Panel on Illicit Financial Flows from Africa noted that “initiatives that are emerging at the global level, particularly in OECD, G8 and G20 and economically powerful States … do not have Africa or indeed other developing country regions in mind” . At the time, the Panel noted that countries in Africa were being required to bear the cost of compliance without being afforded the opportunity to participate on an equal footing in decision-making. Similar concerns have been echoed by developing countries groupings and civil society organizations alike in the process laid out by the Inclusive Framework on Base Erosion and Profit Shifting .
A global tax body would enhance tax collection, sealing tax leakages, providing a neutral ground for creating tax rules and resolving any disputes that arise with a sub -regional, regional and international representation. Countries have stated that illicit financial flows and climate finance are enough reason to support the setting up of a fiscal authority, while others focused on the need for transparency and equity in discussion spaces .
International Debt Architecture
Countries around the world are in debt crisis and each faces additional challenges whose solutions needs financing. Debt service payments take away scarce fiscal resources from health, education, social assistance, and infrastructure investment. Payments scheduled for 2023 and 2024 are likely to remain elevated because of high interest rates, maturing principal, and the compounding of interest on Debt Service Suspension Initiative deferrals . 60 per cent of the countries eligible for the Debt Service Suspension Initiative are assessed at high risk of debt distress or are already in debt distress. Escalation of geopolitical tensions from the Russia-Ukraine war could lead to even tighter global financial conditions, higher inflation, lower growth, and higher stress on public finances and, consequently, have adverse implications for low and middle-income countries’ debt dynamics .
Global debt is at USD 305 trillion  with national debt unsustainably surging in trillions annually . Increases in the size of debt and debt payments underscore the need to create a more effective debt reduction process for low- and middle-income countries in debt distress. Given the changes in debt composition, creating such a process has become challenging and requires cooperation from all major creditors . The complexity of debt servicing including undisclosed terms such as collateralization of state assets  calls for a monitoring authority. A global tax body housed in a developing country provides an opportunity for developing countries to have a neutral and autonomous space to solve disputes negotiating debt payment terms and fair bilateral treaties.
Tax treaties analysis show bilateral investment treaties and the investment standards developed by arbitrators over the last decades just do not match up with debt restructuring. Investment arbitration was not designed to deal with creditors seeking to enforce sovereign bonds and does not have institutional competence to determine the ability of a State to repay its debt following default as it focuses on individual property and not creating an effective distribution of assets with regard to the interests of other claimants . Consideration needs to be given to the diversion of national income from social and economic expenditure to debt servicing. The loss of control by governments over their fiscal policy through lending conditionalities must also be acknowledged. There is a need to analyse how such conditionalities, including the required financial consolidation efforts, may undermine the ability of a State to respect, protect and fulfil human rights .
In the absence of an international framework to regulate sovereign debt restructuring, investment arbitration has been seen as a potential forum for holdout creditors and vulture funds for seeking to enforce sovereign debt instruments. That goes against the fact that investment arbitration was created to protect FDI and productive investment, with the aim of promoting economic development. The system of investment arbitration was not designed to deal with financial obligations, nor to provide protection for the claims of speculative hedge funds and non-cooperative creditors. However, to date, most investment tribunals have found jurisdiction over sovereign debt disputes, despite the unique context in which debt restructuring takes place. The willingness of investment arbitrators to hear such disputes may encourage vulture funds and holdout creditors to use this form of dispute resolution .
In addition, reforming credit rating agencies towards allowing developing countries to have access to financial resources to strengthen economic, social and cultural rights during special circumstances, such as the COVID-19 pandemic, and assisting them in obtaining long-term economic development should be part of the credit rating assessment equation and introducing a monitoring system of credit rating agencies ensures fair financing mechanisms for developing countries .
In addition, developing countries whose source of financing is external debt for infrastructure projects with a direct impact on access to quality health care, free public education, and mobility are faced with development costs in the form of loan conditionalities and surcharges exacerbating debt crisis. Given the context of subordination in which debtor States find themselves, these loans are often accompanied by conditionalities, which are generally not negotiated on equal terms between States, let alone with the participation of populations in situations of structural vulnerability, ultimately having a negative impact on human rights . These surcharge payments are supposedly set for precautionary purposes. In other words, they seek to reduce the IMF’s exposure to the risk of default. In recent years, the weight of surcharges has grown to the point of becoming one of the IMF’s main sources of income (accounting for 41 per cent of income). Despite their significance, the IMF would obtain positive results even if it eliminated surcharges. Therefore, the IMF does not depend on them to function or lending purposes .
Currently, developing countries spend most efforts on applying tax rules. Spearheading a global tax body will enable these countries to contribute to improving and formulating new tax rules, bringing balance from the challenge faced globally in the OECD inclusive framework dilemma.
Emerging Economies And Taxation
States must exercise due diligence to minimize the risk of human rights violations through the adoption and operation of bilateral investment treaties and free trade agreements and to foreclose the danger of having to compensate foreign investors as a consequence of adopting necessary fiscal, financial and debt resolution measures or policies designed to respond to changing circumstances such as financial crises, new scientific findings or public demand for laws of general application. Individuals and groups should reclaim their democratic right to participate in decision-making in the determination of governmental budgetary, fiscal, economic, trade and social policies. Additionally, emerging issues in digital taxation highlight the need for a global approach that prioritizes the needs and sustainable development of all countries over the economic interests of a small number of nations .
Already existing agreements and rules and new ones need to be negotiated and set-up in a fair and equitable manner. The WTO moratorium on customs has impacted the developing countries’ economic growth, jobs, the attainment of the SDGs and tariff revenue loss where in 2017 alone, the loss to developing countries was USD 10 billion .
The continued globalization has led to continued innovation impacting all countries such as the digital economy, metaverse etc. These economies affect the tax collection in a country. Therefore, having neutral space to discuss and agree on tax- sharing agreements, cross-border tax disputes and cooperative mechanisms will increase economic development and global stability.
For all governments, losses in taxable revenue through illicit financial flows reduce the available pool of resources essential for investing in social policies and public services. Governments cannot tackle those issues alone, making international cooperation and assistance a cornerstone of the present report. A multilateral, inclusive and democratic fiscal architecture is crucial to addressing global tax avoidance and evasion .
The United Nations-led tax convention should recognize that the realization of human rights must be a fundamental objective of fiscal policy and that the obligations of States to respect, protect and fulfil human rights demand a proactive role for the State and must guide tax decision-making. The negotiation must be based on a commitment from all States to start afresh for the creation of a new entity that will be focused on the fiscal realisation of human rights as its core, ultimately supporting recommendations made in line with peace, security and the realisation of rights. That body should not be housed within existing United Nations structures; however, in the context of the current economy this may be a temporary necessity. The Independent Expert posits that there is a need for new international fiscal norms on a clear, equitable and transparent basis . Foreseeable challenges are in the financing needs of the global tax body in creation, maintenance and staffing .
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Attiya Waris was appointed the UN Independent Expert on foreign debt, other international financial obligations, and human rights by the Human Rights Council at its 47th session, and took up the function on 1 August 2021. She is the only Professor of Fiscal Law and Policy in Eastern and Central Africa. She holds a PhD in Law and is a specialist in Fiscal Law, Policy and Development. She is an advocate, company secretary and arbitrator of over 20 years standing and was the founding Chair, Fiscal Studies Committee from 2017-2020. She is an Observer to the UN Tax Committee. She teaches at the Law School, University of Nairobi, Kenya and has previously taught in South Africa, Rwanda, Malaysia and the United Kingdom. She has researched and published on global, African, Asian, European as well as Latin American issues.