* Editorial 2
Reducing financial opacity requires more than exchange of tax information with other jurisdictions
Transparency seems to have become taboo in India. As the country remains mired in an economic slowdown, with evidence of falling employment and consumption, the government is persistent in its denial. Instead of actually addressing the problem, it seeks to suppress or manipulate official data to somehow provide a more optimistic picture. We saw this once again recently as the Union Budget was presented, based on numbers for revised estimates for the current year and Budget estimates for the coming year that the Finance Ministry itself knows are unlikely.
The opacity of data also extends to cross-border movement of funds generated through a range of activities, including tax evasion, misappropriation of state assets, laundering of the proceeds of crime, and bribery. Even here, India still has a lot to do, as confirmed by the recent publication of the Financial Secrecy Index by the Tax Justice Network, a U.K.-based financial advocacy group. On the surface, India has managed to reduce its contribution to global financial secrecy, with its rank falling from 32 on the 2018 index to 47 in 2020, but this is partly because the new edition of the index covers more countries than it did two years ago.
Arrangement with Switzerland
It is true that the government has adopted and supported a few transparency reforms, such as the automatic exchange of tax and financial information with other jurisdictions, like Switzerland. Thanks to that, for example, if an Indian citizen has an account with a Swiss bank, and has a balance over a certain threshold, this information will be sent to the Indian tax authorities automatically.
But stopping the financial haemorrhage and making multinationals and the super-rich pay their fair share of taxes requires much more. Capital flight out of India by Indian elites and foreigners alike has been undermining our country’s development for decades. An important part of these flows is the result of artificial profit shifting by multinational companies taking advantage of an outdated international tax system.
These multinationals may be making profits in India but can easily declare those profits in a low tax jurisdiction like Hong Kong and justify that transaction as a payment for the use of a patent. According to one estimate, this strategy represented a loss of $27.5 billion in 2014 for the Indian government, up from $142 million in 2000.
The government did create a beneficial ownership register — which would allow the identification of the beneficial owner of an asset regardless of whose name the title of the property is in — but the law is weak, since it exempts a lot of people at the discretion of the authorities. Also, this register is not accessible to the public.
Onshore financial services
That’s not all. Three years ago, the government took the paradoxical decision to set up onshore international financial services in the country. This is how the International Financial Services Centre in the Gujarat International Finance Tec-City (GIFT-City), Gandhinagar, emerged, modelled after offshore financial centres such as Hong Kong, Singapore, the City of London and Dubai. While this has not created much employment, it has led to growing possibilities for regulatory arbitrage by financial firms, with potentially very problematic consequences.
Meanwhile, the government keeps granting tax incentives on a discretionary basis, even though there is little evidence that these incentives attract investment. Instead, as shown recently in International Monetary Fund research, factors such as quality of infrastructure, a healthy and skilled workforce, market access and political stability matter much more. The massive reduction in corporate tax rates has thus far not led to any increase in private investment — but it has meant a significant reduction in tax revenues, with devastating consequences. It translates into a lack of resources for education, healthcare, food and nutrition and infrastructure. India is already an outlier among similarly placed developing countries with its low tax-GDP ratio of 18%. The government budget is also highly dependent on indirect taxes like the Goods and Services Tax which are regressive and hit ordinary citizens harder.
Increasing public spending
It is now beyond obvious that India cannot revive its economy without increasing public spending, and so increasing its fiscal resources is essential. Among other measures, this requires urgent adoption of legislation and institutional reforms to end financial opacity — including, for example, opening the beneficial ownership register to the public and stopping the creation of onshore tax havens.
In addition, the Government of India must also assume a more vocal role in the international debate about how to make multinationals pay their fair share of taxes. This means continuing to appeal for a United Nations tax body, which is much more legitimate than the Organisation for Economic Co-operation and Development (OECD), the arena where tomorrow’s global tax system is being decided. The OECD’s proposals, published at the end of 2019, are neither ambitious nor fair enough, as the Independent Commission for the Reform of International Corporate Taxation (of which I am a member) explained in a recent report. If the organisation continues to remain deaf to the demands of developing countries, India must be prepared to go it alone, thinking unilaterally about how to make multinationals pay what they owe.
Jayati Ghosh is a professor of economics at Jawaharlal Nehru University
Dialogues, discussions and debates are crucial in a democracy
At ‘The Huddle’, The Hindu Group of Publications’ annual thought conclave, participants invariably convert interactions on the sidelines into open house sessions. They compare how the topics that were discussed at The Huddle were covered by the newspaper in its pages. Some of them thought that the newspaper and The Huddle were a perfect fit as both share the idea of dialogue, debate and discussion. One them said that my definition of my role “where I begin from a position that all complaints are made in good faith and that no journalist comes to work to mislead readers” was limiting. He thought my columns worked well when I found fault with the reporters or the newspaper, but read defensive when they explained journalistic terms and theories. He was delighted with my column, “Journalism in the time of an epidemic”(February 10), and felt let down by the subsequent column, “Strident nationalism and rigorous journalism”(February 17).
Over a cup of coffee, I explained to him that as an internal news ombudsman, I always remember the saying, “To a man with a hammer, everything looks like a nail.” Many instances of overreach happen because of this attitude where there is little space for critical evaluation. My job is to critically evaluate complaints using journalistic yardsticks and examine whether or not the newspaper did a fair job of addressing them. It is neither about vindicating the newspaper’s writings nor about rejecting them.
Exchange of views
The session on the Citizenship (Amendment) Act (CAA) gave me an opportunity to explain the newspaper’s approach to contentious issues. I drew the attention of this reader to a study by Meltwater India that pointed out to the fact that “NDTV, [The] Hindu, Dainik Jagran [are the] biggest drivers for online conversation on CAA”. This study put The Hindu on top in the print category as it led the mScore based on editorial mentions, reach, and tonality for CAA-related stories.
When Yamini Aiyar, President of the Centre for Policy Research, pointed out that the CAA fundamentally upended the Constitution by creating two very distinct pathways of citizenship on the basis of religion, and how problematic it is to decouple the CAA from the proposed National Population Register and National Register of Citizens, as both are intrinsically intertwined, the reader who raised questions earlier acknowledged that there is a clear method in this newspaper’s approach to both reporting as well as debating issues. On the question of citizenship, he was able to see why I mentioned the case of the plantation Tamils of Sri Lanka and their statelessness in an earlier column, “The enemies of writing” (January 27, 2020). It was an exchange of views where a reader who did not agree with the editorial stand on some crucial contentious issues accepted later that there was a clear thinking behind the editorial judgment and that it was not guided by narrow partisan considerations.
Listening to diverse voices
The question of the “other” came up through the discussions. There were two panels in which the theme of “othering” came up for intense scrutiny. The first panel was on the Kashmir conundrum and the second one was on the age of the strongman and the rise of illiberal democracies. The participants realised that there is a need to listen to diverse voices rather seeking confirmation bias. They realised that critical voices against muscular nationalism are the ones that keep the space for plural society intact. The role for the media in this task, despite a lot of external pressures, is immense.
If the newspaper has to remain the site for a democratic mediation of ideas and to hold those in power accountable, the fundamental requirement is empathy. President Ram Nath Kovind said that The Hindu sticks to the five basic principles of journalism: truth-telling, freedom and independence, justice, humaneness, and contributing to the social good. These five pillars are raised on the foundation called empathy.
At the end of the conclave, the reader said that though his heart is with what BJP MP Rajeev Chandrasekhar said about the CAA, and what BJP national general secretary Ram Madhav’s said on Kashmir, he also realised that the opposing viewpoints had some rationale. He said that the government should be open for dialogue rather than implementing decisions without seeking people’s opinions. He said, “Please remain a listening post and never become a hammer.”
During a visit to the Kerala town in 1934, the Mahatma planted a mango tree that still survives
Payyanur taluk, situated on the banks of the Perumba river in Kerala’s Kannur district, played a significant role in India’s struggle for independence and also has a historical engagement with Gandhian thought and action.
In the early days, the Simon Commission protest in 1928 was the first major movement that ushered Payyanur to the forefront of the freedom struggle. Moyarath Sankaran, A. Lakshmana Shenoy and Subrahmanyam Thirumunpu were the leaders of ‘Simon Go Back’. The same year witnessed the All Kerala Political Conference at Payyanur, which was presided over by Jawaharlal Nehru. During that conference, resolutions were passed demanding poorna swaraj (complete independence) for India and permanent tenancy for land tillers.
The Salt Satyagraha in 1930 was another landmark in Payyanur’s history. ‘Kerala Gandhi’ K. Kelappan led a procession of 33 satyagrahis from Kozhikode to Payyannur, the southern tip of the North Malabar. Poochal Beach of Ramanthali village, on the outskirts of Payyanur, was the arena for the ritual of disobeying the notorious salt law of the British Raj. S.A. Barelvi, in his newspaper the Bombay Chronicle, described Payyanur as the “Second Bardoli,” honouring its valour and sacrifice during the Salt Satyagraha.
Payyanur was also an epicentre of the anti-untouchability movement. Great leaders of the movement at Payyanur — A.K. Gopalan, K.A. Keraliyan and Vishnu Bharatiyan — ushered boys from the oppressed Pulaya community into the southern corridor of the Kandoth Sree Kurumba Bhagavathi Temple.
Feudal elements tried to evoke communal friction between the Ezhavas, who ran the temple, and the Dalits. The leaders were brutally tortured by the caste supremacists, but this did not dent the enthusiasm of the movement.
One of the first crusaders against casteism in Payyanur was Swami Anandatheertha. A second-rank holder in Physics from the Madras University, Ananda Shenoy, a Konkani Brahmin by birth, should have otherwise got a respectable job under the British. But choosing a different and more adventurous path, he jumped into the freedom struggle and joined Sabari Ashram in 1926. Following Gandhiji’s advice to take up the task of uplifting the oppressed classes, he went to Sivagiri in 1928; he was consecrated as ‘Swami Anandatheertha’ by Narayana Guru in the same year and raised the banner of revolt against casteism.
Rights of Dalits
Payyanur, which was at that time a morass of rampant casteism, and a town with which the Swami had close contact since 1920, eventually became his karmabhoomi. At the time, lower-caste people were being systematically de-humanised there. The Swami understood that the rights of the oppressed cannot be gained without imparting a proper education to them; so in 1931 he started a school for the oppressed. He later staged numerous dharnas before barber shops where Dalits were not admitted. He also led a march to Guruvayur, where free meals were being given to Brahmins only, although many of those who were excluded from this handout were starving.
Gandhiji visited Kerala several times, but his visit to Payyanur in January 1934 was special — it was a private visit to call on Swami Anandatheertha. Gandhiji spent a whole day at the ashram and planted a mango tree there, which still thrives at that site. An urn containing ashes from the funeral pyre of Gandhiji is still preserved in the ashram.
The government of Kerala plans to set up a Mahatma Gandhi Smriti Museum. This be fitting tribute both to Gandhiji’s legacy and to Payyanur.
Rajmohan Unnithan is an MP