Ecuador Court Forces Tax Changes to Comply with the Right to Health
VIEWPOINT
Berenice Cerra and Daniel Dorado
The Justice of Ecuador has released a decision declaring an executive decree that eliminated and decreased taxes on ultra-processed food products, tobacco, alcohol, guns, and plastics, unconstitutional.[1] In so doing, the judiciary set an important precedent regarding the relationship between tax policy, the effective enjoyment of human rights, and the achievement of Sustainable Development Goals (SDGs). It also explicitly acknowledged that public policies, even an executive decree, should respect the human rights principle of progressive realization and consider the impact of lowering taxes on public health and noncommunicable diseases (NCDs). This ruling shows that taxes can be a powerful tool in promoting human rights and policymakers must be mindful of who is benefiting and who is being left behind.
Taxes, NCDs, and violations of the right to health
Globally, NCDs kill 41 million people each year, equivalent to 74% of all deaths.[2] In the Americas region, NCDs cause about 80% of deaths, 40% of which are premature deaths.[3] More than two-thirds of NCDs are attributable to modifiable risk factors, including tobacco use, alcohol consumption, lack of physical activity, and unhealthy diets.[4]
The Committee on Economic, Social, and Cultural Rights (CESCR) has recognized taxation has a role in fulfilling human rights obligations and has urged states to adapt their tax policies to comply with international human rights law.[5] Taxes have extra-fiscal objectives in creating healthy environments that discourage behaviors or activities detrimental to the realization of rights and incentivizes the enjoyment of rights.[6] The committee has recommended that tobacco taxes are adopted or increased, and called on states to impose taxes on sugary drinks and ultra-processed food products.[7] The CESCR has also made recommendations about tax policies to address other pressing human rights issues, such as gender inequality and lowering greenhouse gas emissions to achieve nationally determined climate change goals under the Paris Agreement.[8]
The obligation to take measures “to the maximum extent of available resources” requires allocating and mobilizing resources.[9] Assessing compliance with this obligation involves examining how financial resources are gathered and distributed to achieve social rights, including, for example, equitable health care coverage or adequate food for vulnerable individuals, as well as having appropriate infrastructure to ensure civil and political rights.[10]
Taxation on unhealthy products has also been analyzed for its effect on progressive realization and compliance with human rights standards.[11] Although increased taxes on harmful products such as sugary drinks may have a larger financial impact on low-income households that consume sugary drinks in the short term, this effect diminishes over time as the benefits of reduced consumption¾in terms of health and expenditure¾ become apparent. An impact assessment of health taxes shows that they have long-term positive impacts on rights realization and equity.[12]
The Case of Ecuador: Using human rights to overturn a harmful tax policy
In January 2023, the Executive Branch of Ecuador published Decree 645, which overturned Internal Revenue Service tax policies and decreased taxes on tobacco, alcohol, and sugary beverages.[13] It also substantially reduced the tariff on electronic cigarettes and other electronic nicotine delivery systems (from 150% to 50%)—specifically targeting youth consumers—and the tariff on weapons (from 300% to 30%), arguing that taxes increase inflation and promote the illicit trade of guns and tobacco products.[14]
Lowering these tax rates is a deliberate regressive action that is not compliant with the International Covenant on Economic, Social, and Cultural Rights nor international human rights law.[15] The evidence shows that health taxes have no impact on inflation, smuggling, or the illicit trade of taxed products.[16] The guidelines for implementing article 6 of the WHO Framework Convention on Tobacco Control state that “efficient and effective systems of tobacco-related tax administration improve tax compliance and collection while reducing tax evasion and the risk of illicit trade.”[17]
In May 2024, after almost a year of intense litigation initiated by the civil organization Colectivo Todos Por la Vida, the court repealed the executive decree and it recognized that “tax measures on unhealthy products materialize State obligations in respect of human rights”, and “subject to the principle of progressivity and non-regression, the State has the responsibility to guarantee respect for the rights established in the Constitution or international instruments, which may not be diminished, impaired or eliminated, nor may they deprive persons of acquired conditions of protection or place them in a situation of vulnerability.”[18]
The Ecuadorian ruling is also based on the preventive function of healthy taxes. The ruling recognizes that “by modifying factors that make it easier for people to get sick, healthy taxes contribute to the creation of healthy environments and materialize the obligations of States concerning the right to health and other interrelated rights” by preventing disease and stopping health systems from being overburdened. Thus, the decision protects individual health and promotes public health.[19]
Even if the objectives for the tax decreases set out by the Government of Ecuador could be interpreted as legitimate, reducing tax is not a suitable means to achieve them. The Government did not meet the burden of explaining how the tax reduction could promote the enjoyment of economic, social, and cultural rights as international human rights law mandates. Therefore, it could not withstand even a weak proportionality analysis, let alone the strict scrutiny required for deliberately regressive measures.[20]
Finally, in July 2024, the Colectivo Todos Por la Vida filed an action of unconstitutionality before the Constitutional Court of Ecuador against the power that allowed the President to reduce health taxes.[21] After the COVID-19 pandemic, the Internal Tax Regime Law allowed the executive to reduce “at any time, by Executive Decree”, the rates of certain taxes. Executive Decree No. 645 was issued according to this power.
Colectivo Todos Por la Vida is arguing that the power granted to the President to use an executive decree to reduce the rates of certain taxes violates the Constitution which states the creation, modification, or extinction of taxes must be executed exclusively through legal processes.[22] Will this action provide an opportunity for the Constitutional Court of Ecuador to develop the principle of progressive realization of human rights further? The authors hope so.
Berenice Cerra, Lawyer, UBA, Buenos Aires, Argentina / LLM, Georgetown University, Washington DC, United States. Email: bc935@georgetown.edu
Daniel Dorado, LLM Candidate, Georgetown University, Washington DC, United States.
References
[1] Specialized Court for Family, Children and Adolescents Offenders of the Provincial Court of Justice of Pichincha, Judgment No. 17U05202300018. Available at https://www.quericoes.org/wp-content/uploads/2024/04/resolucion-24abr2024-decr645-sala-familia-ninez-adolescencia-1.pdf.
[2] WHO, Noncommunicable diseases, Key Facts, 2023, available at: https://www.who.int/news-room/fact-sheets/detail/noncommunicable-diseases.
[3] PAHO, Noncommunicable diseases, 2024. Available at https://www.paho.org/en/topics/noncommunicable-diseases.
[4] Ibid.
[5] CECSR, “Concluding observations on the fourth periodic report of Guatemala”, 2018, UN Doc. CCPR/C/GTM/CO/4; CECSR, “Concluding observations on the third periodic report of Serbia”, 2021, UN Doc. CAT/C/SRB/CO/3; CECSR, “Concluding observations on the third periodic report of Benin”, 2020, UN Doc. E/C.12/BEN/CO/3, among many others.
[6] REDESCA, Thematic report on Non-Communicable Diseases (NCDs) and Human Rights in the Inter-American System, 2023.
[7] CECSR, “Concluding observations on the fifth periodic report of Italy”, 2015, UN Doc. E/C.12/ITA/CO/5, para. 51; CECSR, “Concluding observations on the sixth periodic report of Italy”, 2022, UN Doc. E/C.12 /ITA/CO/6, para. 96; CECSR, “Concluding observations on the sixth periodic report of the United .Kingdom”, 2016, UN Doc. E/C.12/GBR/CO/6, para. 54; CECSR, “Concluding observations on. Belgium’s fifth periodic report,” 2020, UN Doc. E/C.12/BEL/CO/5, para. 49.
[8] CECSR, “Concluding observations on the sixth periodic report of Italy”, para. 34; CECSR, “Concluding observations on the third periodic report of the Czech Republic”, para. 19.
[9] CECSR, “Concluding observations on the sixth periodic report of Italy”, para. 24; CECSR, “Concluding observations on the fourth periodic report of Guatemala”, para. 17.
[10] Pan American Health Organization, Impuestos saludables: guía breve , 2020.
[11] REDESCA, see note 6.
[12] O’Neill Institute for National and Global Health Law, Defending the Colombian Tax on Ultra-Processed Sugar-Sweetened Beverages Is a Human Rights Issue, 2023.
[13] Executive Branch, Decree 645, 2023; SRI Resolution No. NAC-DGERCGC22-00000063.
[14] WHO, WHO report on the global tobacco epidemic, 2023: protect people from tobacco smoke. 2023.
[15] International Covenant on Economic, Social and Cultural Rights, 1966; Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, 2008.
[16] PAHO, Health Taxes, 2024.
[17] WHO, WHO Framework Convention on Tobacco Control, 2003.
[18] Judgment No. 17U05202300018, see note 1.
[19] Ibid; V. Castagnari Aznar y S. Serrano Guzmán, Cuando no retroceder es avanzar en la protección del derecho a la salud. Agenda Estado de Derecho, 2024.
[20] V. Castagnari Aznar (see note 19).
[21] Todos por la Vida, La democracia y los impuestos, 2024. Available at: https://www.quericoes.org/2024/07/12/la-democracia-y-los-impuestos/.
[22] Ibid.