Why Indian tax evasion costs the UK

Though increased tax justice could help both developed and developing nations, it is unlikely we can

The UK Uncut protests have put tax justice on the agenda as never before. But, while we tend to see this as a problem of domestic policy -- equating amounts dodged in corporate tax to amounts cut from the public sector -- could it also hold the answer to reducing our aid budget, as well as decreasing developing nations' reliance on charity?

The UK's decision to continue aid to India, recently confirmed in its 2011 bilateral aid review by International Development Secretary Andrew Mitchell, has been controversial to say the least, especially given that other areas face deep spending cuts.

In these straitened financial times, countries across the spectrum are having their aid stopped, from incredibly poor nations such as Burundi, Niger, and Lesotho, to burgeoning economic powerhouses China and Russia. So why will aid continue to India at a cost of around £280m a year to the UK?

India has nuclear and space programmes, and has enjoyed above 8 per cent growth over the last four quarters. However, the argument for continued aid goes that poverty in India is clearly endemic, and is not improving despite the country's continued economic growth. The Multidimensional Poverty Index shows that of its population of roughly 1.1bn, there are still around 645m people living in poverty in India, 421m of whom live in the eight northern states alone.

In a sense, the UK could be seen as morally obliged to continue aid to India as a result of the effects of its colonial legacy. However, at the G20 Finance Ministers summit which took place in Paris on the 18th and 19th of February, the Indian minister Pranab Mukherjee pointed out that if tax evasion could be clamped down on, developing countries could begin to take full responsibility for their own affairs without the need for aid.

The extent of India's tax problem -- and the similarities it bears to that in the UK -- are illustrated by Vodafone. The company, targeted by UK Uncut protestors for dodging up to £4.8bn of taxes here, is also charged with evading £1.7bn of tax in India.

In a recent report entitled Illicit Financial Flows from Developing Countries: 2000-2009, Global Financial Integrity (GFI) estimated that India had lost a reported $104bn in tax evasion between 2000 and 2008. In another report, The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008, the GFI estimated that India had lost a total of $462 billion in tax evasion from independence in 1948 till 2008.

In an attempt to close this gap, India recently joined the Task Force on Financial Integrity and Economic Development. The Task Force advocates improved transparency and accountability in the global financial system, and the halting of actions like capital flight and transfer mispricing, which are developing countries' main problems with tax. India is now also pushing for a removal of the distinction between 'tax evasion' and 'tax fraud' which facilitates the evasion of tax, and impedes effective exchange of tax information between countries.

Nonetheless, India and many other developing countries still need the help of other G20 members in getting tax information exchange agreements, which would help in countering tax evasion. This would include pressuring the International Accounting Standards Board to act seriously on tax dodging. Such actions could then eventually lead to a reduction in the amount of aid required, halting charity and helping developing nations to become financially independent.

The UK itself seems to be unsure where it stands on tax evasion. Furthermore, with George Monbiot's claims that the government are making obscure changes to tax laws to benefit the rich, and Nicholas Shaxon's exposure of the UK's tax haven in the guise of the City of London Corporation, it is hard to imagine that developing nations, including India, will ever see their tax evasion rates decrease.

Liam McLaughlin is a freelance journalist who has also written for Prospect and the Huffington Post. He tweets irregularly @LiamMc108.

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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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