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.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.