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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There is nothing compassionate about Britain’s Dickensian tolerance of begging

I was called “heartless” for urging police to refer beggars to support services. But funding drug habits to salve a liberal conscience is the truly cruel approach.

In Rochdale, like many other towns across the country, we’re working hard to support small businesses and make our high streets inviting places for people to visit. So it doesn’t help when growing numbers of aggressive street beggars are becoming a regular fixture on the streets, accosting shoppers.

I’ve raised this with the police on several occasions now and when I tweeted that they needed to enforce laws preventing begging and refer them to appropriate services, all hell broke loose on social media. I was condemned as heartless, evil and, of course, the favourite insult of all left-wing trolls, “a Tory”.

An article in the Guardian supported this knee-jerk consensus that I was a typically out-of-touch politician who didn’t understand the underlying reasons for begging and accused me of being “misguided” and showing “open disdain” for the poor. 

The problem is, this isn’t true, as I know plenty about begging.

Before I became an MP, I worked as a researcher for The Big Issue and went on to set up a social research company that carried out significant research on street begging, including a major report that was published by the homeless charity, Crisis.

When I worked at The Big Issue, the strapline on the magazine used to say: “Working not Begging”. This encapsulated its philosophy of dignity in work and empowering people to help themselves. I’ve seen many people’s lives transformed through the work of The Big Issue, but I’ve never seen one person’s life transformed by thrusting small change at them as they beg in the street.

The Big Issue’s founder, John Bird, has argued this position very eloquently over the years. Giving to beggars helps no one, he says. “On the contrary, it locks the beggar in a downward spiral of abject dependency and victimhood, where all self-respect, honesty and hope are lost.”

Even though he’s now doing great work in the House of Lords, much of Bird’s transformative zeal is lost on politicians. Too many on the right have no interest in helping the poor, while too many on the left are more interested in easing their conscience than grappling with the hard solutions required to turn chaotic lives around.

But a good starting point is always to examine the facts.

The Labour leader of Manchester City Council, Richard Leese, has cited evidence that suggests that 80 per cent of street beggars in Manchester are not homeless. And national police figures have shown that fewer than one in five people arrested for begging are homeless.

Further research overwhelmingly shows the most powerful motivating force behind begging is to fund drug addiction. The homeless charity, Thames Reach, estimates that 80 per cent of beggars in London do so to support a drug habit, particularly crack cocaine and heroin, while drug-testing figures by the Metropolitan Police on beggars indicated that between 70 and 80 per cent tested positive for Class A drugs.

It’s important to distinguish that homelessness and begging can be very different sets of circumstances. As Thames Reach puts it, “most rough sleepers don’t beg and most beggars aren’t rough sleepers”.

And this is why they often require different solutions.

In the case of begging, breaking a chaotic drug dependency is hard and the important first step is arrest referral – ie. the police referring beggars on to specialised support services.  The police approach to begging is inconsistent – with action often only coming after local pressure. For example, when West Midlands Police received over 1,000 complaints about street begging, a crackdown was launched. This is not the case everywhere, but only the police have the power to pick beggars up and start a process that can turn their lives around.

With drug-related deaths hitting record levels in England and Wales in recent years, combined with cuts to drug addiction services and a nine per cent cut to local authority health budgets over the next three years, all the conditions are in place for things to get a lot worse.

This week there will be an important homelessness debate in Parliament, as Bob Blackman MP's Homelessness Reduction Bill is due to come back before the House of Commons for report stage. This is welcome legislation, but until we start to properly distinguish the unique set of problems and needs that beggars have, I fear begging on the streets will increase.

Eighteen years ago, I was involved in a report called Drugs at the Sharp End, which called on the government to urgently review its drug strategy. Its findings were presented to the government’s drugs czar Keith Hellawell on Newsnight and there was a sense that the penny was finally dropping.

I feel we’ve gone backwards since then. Not just in the progress that has been undone through services being cut, but also in terms of general attitudes towards begging.

A Dickensian tolerance of begging demonstrates an appalling Victorian attitude that has no place in 21st century Britain. Do we really think it’s acceptable for our fellow citizens to live as beggars with no real way out? And well-meaning displays of “compassion” are losing touch with pragmatic policy. This well-intentioned approach is starting to become symptomatic of the shallow, placard-waving gesture politics of the left, which helps no one and has no connection to meaningful action.

If we’re going make sure begging has no place in modern Britain, then we can’t let misguided sentiment get in the way of a genuine drive to transform lives through evidenced-based effective policy.

Simon Danczuk is MP for Rochdale.