Acknowledgement: The Tax Justice Network is grateful for the information provided by India’s Self Employed Women’s Association (SEWA).
The COVID 19 pandemic has ‘flipped’ our understanding of many things which we took for granted pre-lockdown. One of these is the role of the state.
States have needed to act to protect our health, our incomes, our industries. This has restricted freedoms and invested powers in institutions that we might not have thought sanctionable only a few months ago. While the picture and level of intervention varies from country to country, questions about the obligations and responsibilities of the state and commitments made by the state under inter-governmental and in international law are important – including with respect to the role of tax and financial transparency in relation to human rights obligations.
The many reports of death, hardship and distress mean that governments will need to think carefully about how they can, and should, meet social and economic rights. Part of these political debates will need to include how resources are distributed and what policies are needed for their redistribution to protect the vulnerable and most marginalised from further inequalities and discrimination.
The impact of COVID-19 on informal women workers is especially hard. Many of us will remain ignorant of how women’s lives are torn apart by the COVID-19 pandemic. Knowing begs the question: what should be our response? How best to alleviate hardships born by women working in the informal economy; the most marginalised in societies? What should our governments, our intergovernmental institutions, do to mitigate the extreme impact of insecurities – food, income, housing, water, sanitation which have been triggered and exacerbated by the pandemic?
India’s Self Employed Women’s Association (SEWA) have documented, and continue to document the extreme hardships of women working in the informal economy. According to SEWA, 93 per cent of India’s workforce is in the informal economy. In the short term, the state and international financial institutions need to step in to shield informal women workers from the shocks of crisis.
Establishing progressive tax systems and developing robust global financial transparency is key to anticipating the effects of social and economic crisis, and to protecting the rights of gender and race. Doing so, for signatory states such as India, also opens both the possibility of “leaving no one behind” as Agenda 2030 (the Sustainable Development Goals) intends, and to meet obligations set out by human rights instruments including the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW) and the International Covenant on Economic, Social, and Cultural Rights (ICESCR).
The right response?
The COVID-19 crisis exposes long term political, social and economic ‘rights’ failures. The plight of many millions of informal workers is an injustice and a rights failure – and a failure to repay the social and economic value that is extracted from women’s informal labour in agriculture, food production, caring, and domestic work.
In India one response to COVID-19 has come in the form of a World Bank loan. Immediate relief is critical as the International Labour Organisation (ILO) has underlined, but this is also a time to underline the need to act for systemic and sustainable change.
21-day curfew – devastation for women
While the COVID-19 pandemic has already led to the loss of jobs and incomes for millions of workers around the world, for millions of poor women agricultural workers and small farmers in India, the 21-day curfew announced on March 22nd has been devastating. Living on the edge of poverty and hunger even before the disease, people now face a ban on movement and transport which has crippled the harvesting, distribution and sale of fresh produce and winter crops. The economic threat for many women and their families is grave.
Failing to recognise the reality – Banks’ loan moratorium
The winter harvest includes crops such as wheat, barley, mustard, canola, sesame, peas, etc. and fresh produce. Many women small farmers had finalised the trade of their produce. They were hoping to pay off their agricultural loans using the income from the sale of their harvests. However, due to the lockdown traders could not pay the farmers. While the Reserve Bank of India announced that all lending institutions should institute a 3-month moratorium on loan repayments, it did not waive the interest on the loans; thus, poor women farmers will have to pay a higher interest. Additionally, as many small farmers borrow from local moneylenders the moratorium does not include them, leaving many women workers without the income to pay back their loans. The government’s deferral of payments on credit card dues will, similarly, yield little or no benefit to poor women in the informal economy.
More than 10,000 small and marginal farmers and vegetable growers from Gujarat as well as farmers in the states of Kerala, West Bengal, Rajasthan, and Punjab could not take their fresh produce such as tomatoes and cabbage to the market. The income they generate from the sale of fresh produce has dropped to almost half. For example, tomatoes should sell for Rs.5 per kg but the women are only receiving Rs.1 to Rs.3 per kg.
Many small farmers had harvested their cotton and wheat and had stocked it in their homes waiting for traders to pick-up the harvest. But due to the COVID-19 crisis, migrant workers are moving back to their homes in villages. However, the homes are full of harvested crops and there is no room for returning family members who are migrants.
Prime Minister Modi made the drastic decision about the 21-day curfew without any considerations for the daily lives of millions of poor women and men and their families. For women and men who live on the margin of daily wages and daily purchase of food, the restrictions on movement mean they are closer to hunger and death even before getting sick with the Covid-19 virus.
Eye catching vs sustainable
In the short-term, social and economic crises require a rapid response. So far the eye-catching responses and “beacons of better” are few and far between. Viet Nam, South Korea and New Zealand appear to have minimized the impact of the COVID-19 virus, for now at least. Denmark and Poland have caught the public mood and imagination on corporate greed with plans to exclude tax haven registered companies from public bailouts (although we have argued that a somewhat broader approach will be needed to ensure benefits).
Responses to COVID-19 in many OECD countries are operating upon the foundations of “austerity” policies, a deliberate shrinking of the state through ideologically led social and economic policy. Not surprisingly, the most aggressive countries in this aspect have found themselves floundering – either reversing economic stance quickly but finding the underlying structures unprepared (by policy), as in the UK for example, or continuing to struggle with the intellectual dissonance between ideological stance and evident need, as in the USA. Most importantly, many of the most marginalised groups suffer and are left behind to fend for themselves. Short-term actions are needed, but based on a progressive systemic, long term approach.
In India, the Tax Justice Network’s Financial Secrecy Index 2020 has documented the progress made in recent years, in terms of addressing financial secrecy. This has included important revisions (2016) to the damaging double tax treaty arrangement with Mauritius. But there remain ongoing problems including “unnamed” ownership.
The transparency of India’s financial architecture is at best partial. Enactment of a Prevention of Money Laundering Act and the establishment of an Financial Intelligence Unit made for an early engagement in, and signature to, the OECD’s Multilateral Competent Authority Agreement (MCAA) for Automatic Exchange of Information (AEOI) in 2015. All this has helped to tighten up on “unnamed” money – money laundering and tax dodging. The 53 active Automatic Information Exchange Agreements India has in place will help to curb illicit finance flows and tax dodging, but more could be done.
Most countries are “guilty” of systemic tax and financial transparency failures. If addressed, such failures could create opportunities to strengthen rights protection and build formidable social and economic foundations.
A progressive tax regime, as the tax justice movement has long argued, is critical to halt the tide of so called profit shifting by multinational corporations and cement the possibility of taxing rights, in particular, in developing countries. As well as being recognised by experts around the globe as an essential element for clamping down on huge tax dodging it is a critical part of a financial transparency policy platform needed to address inequalities and human rights failures.
Governments need to match their domestic actions to the strength of their voice on the international stage. While India continues to take progressive positions in international fora such as the G24 – by advocating for more taxing rights for developing countries and pushing for unitary tax approaches – the same cannot be said for its national positions and political bent which has favoured bailouts while leaving the most vulnerable to suffer.