Can Tax Policy Stop Human Trafficking?

Abstract:     
The total number of victims who are held in captivity to perform forced labor at any one time is estimated to be as high as twenty-seven million. That would be equivalent to every man, woman, and child in the states of New Hampshire, Vermont, Massachusetts, and New York being held in captivity and forced twelve to fourteen hours each day to labor in sweatshops, or toil as agricultural workers, or service sexually many customers every day with no hope that it will ever end except by death. They would live in crowded, dirty hovels, receive little food and no medical care, and live under the constant threat of beatings, rape, and other violence. Every year, new victims will be added to their numbers. This is human trafficking.

The twenty-seven million victims include those who are trafficked within their own country and those who are trafficked across international borders. Each year, as many as one to four million new victims are trafficked across international borders. Despite strong denunciation by the U.N., the United States, and the European Union, this modern day slavery flourishes.

Of all the factors that lead to human trafficking, government corruption is the most significant. This article recommends an economic incentive that would recruit as allies in this war the wealthy residents of countries where the abuse is most rampant, and where the governments themselves, or government officials are complicit in trafficking. The economic incentive that would be used is taxation.

The wealthy invest the bulk of their money in the world's major economies and the governments of the major economies should re-impose the withholding tax on interest income from investments. These governments can then agree to reduce the withholding tax rates on residents of complicit countries if trafficking is reduced. In addition, the governments of the major economies can promise to refund to the complicit governments a certain amount of the interest income withheld after the complicit governments achieve certain benchmarks. This economic solution applies pressure on those who are in positions of power to achieve change, and at the same time does not hurt those who are the most vulnerable to trafficking - the poor.

Keywords: Human Trafficking, Human Rights, Tax Policy, International tax, International tax, Welfare State, Developing Countries' economies, Integrated theory

Accepted Paper Series