Taxing The Superprofits to Win The Inflation Battle, and Defend Human Rights

By Magdalena Sepúlveda

For many, it began with cancelling a doctor’s appointment, not buying clothes for their children, giving up on visiting relatives because of the cost of transportation, and paying only the most urgent bill. Quickly, they were forced to cut back on food, by reducing first quality and then quantity, and then even skipping meals. Even though they are working and receiving a salary, today, they find themselves lining up at food banks to feed their children and themselves.

Everywhere, families are losing the inflation battle. Once their coping mechanisms are exhausted and nothing more can be dispensed, what remains are feelings of anguish, and lack of control. They no longer have a say in decisions affecting their lives, they are forced to depend on others resulting in a loss of dignity. This is, in fact, a violation of their human rights.

At the forefront of the victims of the cost-of-living crisis are, as always, the most vulnerable: children, women, the elderly, people with disabilities, minorities, and migrants. In England, for example, where 2.2 million more people are forced this year to sacrifice expenses that are essential to their well-being. The New Economics Foundation calculates that soaring costs weigh 9 times more on the poorest people than on the richest 5%, in proportion to their income. In the U.S., while 38% of white households say they are facing serious financial problems, among Latino families the proportion rises to 48%, with 55% for their black counterparts, and peaks at 63% among Native Americans.

Worldwide, women, especially when also single parents, are the primary victims of the price spike, which the Institute for Women's Policy Research in the U.S. calls “she-flation”. And the impact on children is devastating: a recent report by UNICEF and the World Bank calculates that, worldwide, three quarters of households with children have experienced a drop in income since the beginning of the pandemic. In one in four households, adults have gone without food for days at a time to try to feed their children.

It is obviously in developing countries, which are even more exposed because of the pandemic, the rise in interest rates on their debts, and the volatility of capital, that the situation is most worrying. In Brazil, a country that had been off the UN hunger map since 2014, 33 million people now have nothing to put on their plates.  Even in Asia, when inflation pressures remain more moderate compared with other regions, they hurt the most vulnerable. According to a World Bank calculation, the increase in the global price of cereals and energy, the poverty rate will surge by at least 3,7% in the Philippines, impoverishing 3,85m people and by at least 6% in Thailand. A very worrying situation when we remember that last year, even before prices started rising in the region, one in five South-East Asians—or 139m people— lacked consistent access to food.

Let's be clear: economic recovery, which is highly hypothetical, will not be enough. And it is just as obvious that the austerity programs that several states are implementing will only make the situation worse by reducing the resources of public services that are already very fragile. They are, however, along with social protection systems, the most effective instruments that states have to fight poverty and inequality. Similarly, if governments persist in trying to replenish their coffers by relying on indirect taxes, such as VAT, this is once again at the expense of the poorest, on whose shoulders this tax weighs proportionally more heavily.

Austerity is not inevitable. States can increase their fiscal space by taxing companies and the super-rich more. Let’s consider the energy multinationals, which have recorded unprecedented profits. ExxonMobil, for example, broke records with its profits in the third quarter of 2022, raking in $19.7 billion in net income, a $2 billion increase from its second quarter, which had already prompted President Joe Biden to say that the company “made more money than God this year”. But ExxonMobil, Total, BP, Shell and the others owe it only to the political situation - and in particular to the war in Ukraine - and not to a jump in their productivity. Everywhere, taxes on superprofits must be put in place, as recommended by UN Secretary-General António Guterres, and as some countries, especially in Europe, have already started to do.

But focusing on the energy sector is not enough, as explained by ICRICT, the Independent Commission for the Reform of International Corporate Taxation, of which I am a member, along with such figures as Joseph Stiglitz, Jayati Ghosh, and Thomas Piketty. Pharmaceutical companies have seen their profits soar thanks to the pandemic, especially as vaccines were developed thanks to public subsidies. The food sector, where oligopolies are common, has also benefited greatly from the situation. It is by speculating on the markets of basic food products such as wheat that another sector, finance, is now making unprecedented profits. And let's not even talk about digital companies, the big winners of the pandemic and the champions of tax avoidance strategies.

Multinationals are not phantom entities. When their profits explode, it is their main shareholders who benefit, even if they do so discreetly. Take Cargill, which controls, along with three other companies, 70% of the world's food market: the company made more than $5 billion dollars in profit last year, the highest in its 156-year history, and is expected to do even better this year. Thanks to this windfall, the family now has 12 billionaires. There were "only" 8 of them before the pandemic. Like them, 573 new billionaires emerged in the first two years of the pandemic, or one every 30 hours, according to Oxfam calculations. The total wealth of billionaires is now equivalent to 13.9% of the world's GDP, three times more than in 2000, and the world's 10 richest men have more wealth than the poorest 40% of humanity - or 3.1 billion people - combined.

As the world just celebrated International Human Rights Day, we must remember that pandemics, wars, and recessions, terrible and painful as they are, do not exempt states from meeting their human rights commitments, nor do they allow them to prioritize other issues. On the contrary, it is in the midst of crises that the commitment to human rights is most meaningful, as is through social protection and public services, that states succeed in protecting the livelihoods, as well as the economic, social, and cultural rights, of the most vulnerable. This is also the only way to make democracy meaningful for all.

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Magdalena Sepúlveda is the Executive Director of the Global Initiative for Economic, Social and Cultural Rights and a member of the Independent Commission for the Reform of International Corporate Taxation (ICRICT). From 2008-2014 she was the UN Special Rapporteur on Extreme Poverty and Human Rights.@Magda_Sepul.

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