The tranche of documents uncovered recently has not only brought several stalwarts of Indian politics, cinema industry, and business tycoons under scanner but has also thrown up pertinent questions over the moral dilemmas of avoiding tax

The paradise in the Paradise Papers refers to tax havens of low or even no taxation. Such havens usually are shadowy and sleazy little countries and principalities such as the Cayman Islands, Lichtenstein and Monaco, and sometimes entities within countries like Jersey, Guernsey, Bermuda in the UK and Delaware and Puerto Rico in the USA. Then there are low taxation countries like Switzerland, Singapore and Dubai that assure secretive rich people of their privacy. 

Essentially a tax haven exists to cheat sovereign states of their lawful incomes. The Tax Justice Network campaign group estimates that corporate tax avoidance costs governments $500bn a year, while personal tax avoidance costs $200bn a year. This in effect means that anywhere between $20-30 trillion of business transactions are sheltered from taxations. Moody’s estimated that in 2016 giant American technology companies such as Google, Microsoft and Apple were hoarding about $1.84 trillion cash in offshore havens. Clearly they are avoiding tax and as bending the rules of the tax system is not illegal unlike tax evasion; they are operating within the letter, but perhaps not the spirit, of the law.

In the early 1980’s, shaken up by the number of scandals in Wall Street, and by the number of its MBA graduates who were found wanting in ethical and moral values, the Harvard Business School made a course on “Leadership and Corporate Accountability” a core requirement. I am sure Jayant Sinha, a Harvard MBA, had to do this course and would have scored a high grade in it. Such courses now are in the core curriculum of the business schools attended by the other two young politicians also named in the Paradise Papers or capers if you will. Sachin Pilot graduated from the famous Wharton School of Business and Karti Chidambaram took his business masters from Texas and a law degree from Cambridge to boot.

Doing the required ethics course is one thing but it is quite something else to be able to resolve moral dilemmas of what John Kenneth Galbraith described as the “HBS’s ethical view of capitalism which derives straight out of the Protestant ethic and its transformational view of money, in which the ability to accumulate wealth is a reflection of one’s character.”

The charge against Jayant Sinha is that while acting as an Omidyar Network representative was on the board of a California company that made a loan to that company’s Cayman subsidiary. Usually such a loan to such a subsidiary suggests a fiddle. Whether Sinha knew this or did not know it is something else? Clearly the evidence does not suggest any malfeasance. But clearly there is room for skepticism. 

Omidyar Network proclaims its belief: “Just as eBay created the opportunity for millions of people to start their own businesses, we believe market forces can be a potent driver for positive social change.” Grand words but that hardly conceals the true goal that is to make bucks, sometimes fast ones too.  Again as Galbraith put it: “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”

Jayant, then fresh out of one of the IIT’s, worked with me way back in the mid 1980’s on a paper that proposed the mass construction of smokeless challahs for rural homes as a profitable employment for hundreds of thousands of rural workers. I remember it as a bit of an elaborate scheme that also computed the savings due to improved health results. It was published in this newspaper and the then Prime Minister Rajiv Gandhi took note of it. I was impressed enough to write a recommendation when he applied for a Masters in Energy Management at Pennsylvania. 

I next met him when I was serving as his fathers Advisor in the Finance Ministry. Jayant and his wife were both working with foreign companies investing in Indian stocks. He was apprehensive about a proposal made by me to disinvest PSU stocks by selling them to the governments banks for onward restructure and disinvestment. The minister had clearly spoken to him. At that time too I wondered if the HBS’s core business ethics course would have seen conflict of interest issues in it? The minister however had plenty of flex in him.

To my mind tax avoidance is just as reprehensible as tax evasion. Sinha was too junior in the Finance Ministry to have expressed views on this. It would have been unlikely though for that is not the HBS way. The previous Finance Minister, himself a Harvard MBA, would not have any left footprints for young Sinha to tread on. Neither would the present lawyer Finance Minister. 

Once at the helm of opposing China, the Manch finds itself using China as an example to keep the WTO at bay, will the government listen?

At an event held in the national capital, the Swadeshi Jagran Manch, an affiliate of the Rashtriya Swayamsewak Sangh, has urged the Government of India to not let up, and continue to apply pressure on the World Trade Organisation (WTO) till the international organisation accepts their demand to eliminate the subsidies-related Aggregate Measurement of Support (AMS) from negotiations – a stand that they have long maintained. The organization believes that the implementation of the AMS will be detrimental to the Indian farmers. They want the government to push for a permanent solution on development subsidies and public stockpiling of food (for the Public Distribution System) in the forthcoming 11th ministerial conference in Buenos Aeries on December 10 and 13.

Many developing countries have grave misgivings over AMS or what is commonly called the 'Amber Box'. Earlier this year, India and China jointly submitted a proposal to the WTO that demands the removal of the unequal policy. The countries claim that the 'Amber box' has now become a prerequisite for the consideration of any other reforms in domestic support of agriculture and should not be so. In the joint submitted proposal, they call these types of deals ‘trade-distorting’ deals, “The joint paper reveals that developed countries, including the US, the EU and Canada, have been consistently providing trade-distorting subsidies to their farmers at levels much higher than the ceiling applicable to developing countries. Developed countries have more than 90% of global AMS entitlements amounting to nearly US$ 160 bn. Most of the developing countries, including India and China, do not have AMS entitlements.”

Participants at the event urged SS Ahluwalia, Minister of State, Drinking Water and Sanitation, to ensure that India must counter the efforts of countries in the European Union, US and Canada to divide the 100-odd developing countries and Least Developed Countries (LDCs) on the issue. According to SJM National Convener, Ashwini Mahajan, instead of pushing of a temporary Peace Clause, India should instead push for a permanent solution and the demand for exemption of these subsidies should be pressed. The day-long deliberation was attended by trade experts and civil society members.

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US, the EU and Canada, have been consistently providing trade-distorting subsidies to their farmers at levels much higher than the ceiling applicable to developing countries.

Asserting that every country has the right to adopt special measures to curb sudden surges in the supply of agriculture produce by increasing import tariffs, the SJM said India should negotiate for the Special Safeguard Mechanism in this regard.

On the proposal to bring rules on Fisheries subsidies, the meeting expressed concern about the attempt to allow developed countries to continue with their subsidies while banning subsidies by developing countries for small-scale, traditional fishing. The organisation also opposed the proposal for investment facilitation which it said might end up in 'commitments from India on investor protection and market access’. It said that India should tread carefully on the issue of freeing e-commerce from regulation as it was a “complex and unknown area’’ which might restrict the government’s ability to regulate giant, multi-national e-commerce companies. “India should not allow the WTO to decide on regulatory rules shaping key policies on health, labour, trade, industry, agriculture, and finance. Losing all tariff revenue on e-commerce, as well as regulatory control over imports is unthinkable for a country like India.’’

The SJM also warned the government against succumbing to pressure on e-Commerce being pushed in trade negotiations in the Regional Comprehensive Economic Partnership (RCEP) and said that it will impact retailers and custom duty revenues.

Giving the example of China, it said the neighbouring country was pushing the interests of a wholesale manufacturer and supplier of Chinese goods, which seeks duty-free access using the e-commerce route.

With Inputs from United News of India