Located on the foothill of the Shivalik mountains, Baddi is the name of a remote dusty town that most Indians have never heard of.
In 2012, when I first arrived there, visiting a distant relative, the sun had set early on the day and it was dark. The mobile phone worked erratically, as I struggled to locate the place in its unmarked, unpaved streets.
His factory was built on the bank of river Sirsa, a tributary of the Sutlej – one of the five rivers that provide the state of Punjab, its name. The river flowed with water, briefly, during the monsoons. At other times, it is an insufferable stench of stagnant effluents discharged from the pharmaceutical companies that have made Baddi their home. Accounting for about US$16B in revenues and supply of roughly 35% of the Asian market needs, the pharmaceutical industry has provided 19 billionaires to India’s rich list.
What attracted all these companies to Baddi was a unique tax break announced by the government in 2003 – which exempted manufacturers from the standard excise levy (40% on some items and generally about 12%) and income tax (40% to 25%).
Overnight a large portion of manufacturing activity in the northern states moved to Baddi. The town remained without infrastructure and essential public services like transport and healthcare. Migrant corporations had no stake in the town or commitment to its small population of 50,000. Meanwhile workers from nearby states that provided essential labour, flocked, chocking the city’s already overstretched resources on its head. Wages were low but work was plenty. Life tough and hazardous – its drinking water contaminated with chemicals leeched from the pharmaceutical industry – spread diseases and… early deaths.
Baddi could be described as a fraud – a manufacturing tax fraud – a government sponsored tax avoidance scheme that allowed large multinational corporations to avoid payment of taxes on an activity that would normally be heavily taxed – at a great human cost. Or is it?
The Gujarat International Financial Tec City (GIFT) – a favourite project of business-friendly Prime Minister of India, Mr Modi, located in Gandhinagar, on the banks of river Sabarmati, promises to be the Baddi of India’s Financial Services sector. Without the pollution, albeit. Businesses that operate in the Special Zone will benefit from Tax Breaks. One such service that GIFT is promoting is known as « Offshore Business ».
On second thought, Baddi is perhaps a wrong example for what GIFT aspires to be – a more accurate description would be Delaware – a State in America that allows more than 50% of its top corporations to evade tax from its federal government. Or perhaps a Cayman Island or Mauritius on-shore?
Prostitution is immoral – the Christians claim. So is the practice of gay sex – proscribed in Islam. Slavery was once not only legal – it was a civilising mission for the White man.
Today, it is illegal to own slaves – but a large majority of workers continue to experience involuntary slavery there being little or no choices on the quality of jobs or the wages they involve. But one thing has not changed -the prerogative of the powerful to set the moral standards for the common man.
Yet, there is no use belabouring the point that we live in a world of moral relativism. Our history is compromised by its writers. Our news originate from unscrupulous sources. Our opinions are being manipulated by powerful vested interests.
We continue to live by their moral rules… while dutifully accepting them to be our own. Like the debate on tax and the arbitrariness of its moral standards – its rates, its applications, its evasion, avoidance and compliance?
How can countries that question the very existence of tax havens continue to promote them (India and America included) as long as it serves their own interest?
The issue is perhaps deeper… and more nuanced.
Responsible journalists who claim to serve greater human interests, would do better if they spent more time forming public opinion, influencing government policy and generating consensus around the foundational principles of taxations than wasting their time leaking information and secrets that are already known.