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Nishara Mendis

Abstract

Anti-corruption measures and increasing the transparency and accountability of financial transactions and taxation policy, has become a major issue of public concern in recent times. The ‘Panama Papers’ scandal highlights the large-scale international tax avoidance and evasion occurring currently, which can also be linked with global corruption, money laundering, organized crime and terrorist financing. The lack of good governance in relation to inefficient or harmful financial and tax regulatory measures and the resulting impact on revenue can also be linked to serious negative repercussions for progressively achieving human rights obligations, especially obligations under the International Covenant on Economic, Social and Cultural Rights (ICESCR) which require provision of public goods and services, such as education, healthcare and other social welfare. Coinciding with the Panama Papers scandal, in April 2016, the Appellate Body of the World Trade Organization issued its decision in Argentina-Financial Services, a case which draws attention to the shortcomings in the global regulation of cross-border private capital flows. This dispute originated when Panama, a country well known as a tax haven, alleged that various Argentine domestic legal regulations concerning financial transparency, which were applied against Panama, were inconsistent with Argentina’s WTO obligations. This comment analyzes the interface between recent developments in the interpretation of human rights obligations of States in the context of harmful tax practices and the WTO obligations of States with regard to the design and implementation of defensive measures against harmful tax practices of other States. While domestic legal reform and Inter-State cooperation for greater transparency and accountability in tax regulation is generally recommended, it also remains possible to take a set of measures which are non-discriminatory and non-arbitrary, to restrict financial goods and services trade with tax havens. The recent scandals and the legal developments both highlight the importance of the principles of good governance and rule of law in the design and implementation of the relevant regulation.

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