Luxembourg tax policies and human rights overseas
Tax abuse robs citizens of economic and social rights. Luxembourg is an enabler of tax abuse and has been requested by the United Nations Committee on the Elimination of Discrimination against Women (CEDAW) Committee to
“provide information on the regulatory framework for industries and companies carrying out operations abroad to ensure that their activities do not negatively affect human rights or endanger environmental, labour and other standards, especially those relating to women’s rights”
Significance of the Study
Enabling tax abuse deprives governments of revenue which could be used to provide public services. This study quantified the impact of Luxembourg tax policies on the fundamental rights of people and children living overseas.
Research objectives
To analyze the economic and social rights deficits resulting from the depletion of government budgets due to tax abuse linked to Luxembourg.
Methodology: Research approach
Data on tax abuse
We used the State of Tax Justice 2023 (SOTJ2023) report which expresses tax abuse (both evasion and avoidance) from countries as a percentage of GDP. We converted this into a percentage of government revenue to translate these losses into economic and social human rights.
Translation
To ‘translate’ the impact of global tax abuse, we use the Government Revenue and Development Estimations (GRADE). GRADE models the impact of an increase in government revenue, which is equivalent to the estimates of tax abuse in individual countries for several Sustainable Development Goal (SDG) indicators.
The model assumes that governments will spend the same amount of additional revenue as in recent years, that is, budget allocation across sectors will remain the same. Therefore, the translations are realistic and tailored to individual countries and are set apart from analyses that equate a change in government revenue with an impact on just one sector or one SDG indicator.
To reflect the long-run impact of the additional government revenue on governance, the additional revenue which governments would have, as a percentage of their total revenue, in the absence of tax abuse is projected over the years 2002-2020 and the impact in the final year (2020) is presented.
Study Results
The State of Tax Justice (SOTJ2023) 2023 reports that Luxembourg contributed 5.85% of global tax abuse.
We present an analysis of global human rights deprivations resulting from government revenue losses due to tax abuse, highlighting the share attributable to Luxembourg in proportion to its contribution to the total global tax loss. Data on tax abuse as a percentage of government revenue are available for 187 countries, while data on fundamental rights cover 88-169 countries, depending on specific rights.
The human rights deprivations attributable to Luxembourg in proportion to their share of the total global tax loss are detailed in Table 1.
Table 1: Global human rights deprivations due to tax abuse and Luxembourg contribution| Basic water daily | Safe water daily | Basic sanitation daily | Safe sanitation daily | Children's deaths (per year) | Maternal Survival | Children in school | |
|---|---|---|---|---|---|---|---|
| Global human rights deprivations due to tax abuse | 14,098,771 | 2,312,845 | 27,627,003 | 5,215,647 | 30,590 | 3,466 | 2,994,138 |
| Countries with data | 168 | 100 | 167 | 88 | 169 | 168 | 163 |
| Luxembourg contribution | 824,778 | 135,301 | 1,616,180 | 305,117 | 1,790 | 203 | 175,157 |
Recommendations
Our modelling indicates that, by enabling tax abuse, Luxembourg limits the ability of other governments to meet their human rights obligations.
Luxembourg must undertake independent assessments of the impact of its tax and financial secrecy policies on human rights overseas. See the memorandum by the Tax Justice Network.