The government has recently consulted on proposals to rebalance the Northern Irish economy; though only one proposal has attracted much attention. This is the question as to whether to devolve the competence to set corporation tax rates to the Northern Ireland Assembly. The Northern Ireland Human Rights Commission has stressed the need for a human rights perspective on this question.
The economic crisis and the Conservative Lib Dem cutbacks have highlighted the key role of budgetary decisions in the realisation of human rights, especially social and economic rights. Civil society groups such as IHRIP internationally and PPR here in Northern Ireland advocate using budget analysis as a tool in the realisation of social and economic rights. The QUB Budget Analysis Project has developed a legal framework for such work. The relevance of international human rights standards in making budgetary decisions has even been recognised in the Treasury’s own guidance on assessment and evaluation of government programmes: the Green Book specifies that international treaties to which the UK is a party “should inform the development of policy” (p 95).
The Green Book guidance explicitly lists the International Covenant on Economic Social and Cultural Rights 1966 (ICESCR) as one of the treaties that authorities should consider. What does ICESCR and its monitoring body have to say on the issue of cutting taxes?
The ICESCR monitoring body has explained in General Comment 3 that the treaty does not have a preference for any particular market/public sector mix; the Committee has emphasised that whatever system is preferred, must be reflect the indivisibility and interdependence of civil, cultural, economic, social and political rights (paragraph 8).
In particular, when governments respond to budget deficits by ‘slashing social expenditure’, they must pay sufficient attention to the consequences for the enjoyment of economic social and cultural rights (1998 Concluding Observations on Canada, paragraph 386). The same applies in the context of recession (1996 Concluding Observations on Spain, paragraph 101). The ICESCR Committee states the principle in its General Comment 3:
‘even in times of severe resources constraints whether caused by a process of adjustment, of economic recession, or by other factors the vulnerable members of society can and indeed must be protected by the adoption of relatively low-cost targeted programmes.’
The ICESCR system is therefore neutral in principle as between capitalist, socialist or mixed economic models. However in practice the Committee has noted that a free market and low tax regime, combined with the effects of globalization, had a negative impact on economic and social rights in Hong Kong. On the other hand, in the context of the high standard of living enjoyed by Australians, the Committee noted (without expressly commending) under the heading of positive aspects the Government decision to introduce a consumption tax and correspondingly reduce income tax for the ‘majority of working Australians.’
Having mentioned some of the general considerations, what of the proposal to devolve powers to set the rate of headline corporation tax? One option would be for the NI authorities to increase the rate to as to increase the resources available for the realisation of human rights. However, presumably these powers would most likely be used to reduce the rate, having the consequence that the block grant to Northern Ireland would correspondingly be reduced. This reduction would likely impact negatively on the degree to which Northern Irish authorities can respect, protect and fulfil the range of economic and social rights set out in ICESCR. That being the case there would need to be very reliable evidence that the spin off effects of any reduction in corporation tax, combined with compensatory measures to protect those disadvantaged by reductions in public sector spending on rights, meant that there would be no retrogression (reduction) in the enjoyment of economic and social rights in Northern Ireland. To this end, the Northern Ireland Human Rights Commission is right to express caution its response to the consultation on devolving corporation tax.
The most important question here is whether any reduction in the block grant would lead to an unjustified retrogression in the state’s realisation of human rights. Another interesting question though is how such a corporation tax cut would be devised – would it be a straightforward cut or would it be something more imaginative?
The human rights bodies occasionally refer to the desirability of tax reductions for specific purposes. However these are usually directly related to the enjoyment of economic and social rights. Thus the ICESCR committee has urged states to ‘consider … tax reductions and social security incentives to allow men and women to reconcile professional and family lives (para 454).’ The ICESCR Committee also sometimes recommends tax incentives designed to promote the realisation of rights for vulnerable groups such as people with disabilities (para 458), young people lacking professional qualifications (para 195), young people, older people and foreign residents (para 351). The Committee has welcomed tax relief for farmers and poorer regions of China (para 137).
The ICESCR committee is not therefore necessarily hostile to tax cuts or tax incentives. However it shows a preference for tax measures that are targeted specifically towards the realisation of human rights especially for vulnerable minorities. If corporation tax powers are devolved and if Northern Irish politicians decide to lower corporation tax rates, then the challenge will be, not only to ensure non-retrogression, but also to devise imaginative tax measures that further the human rights of the vulnerable in our society.