List of Contents
- How is the UK a tax haven for high net worth individuals?
- What are extradition issues between India and the UK that are related to people accused of financial crimes in India?
- What are the financial crimes committed by these people?
- Why is it an appropriate time to raise the issue of extradition of people accused for financial crimes in India with the UK?
Source- The post is based on the article “The UK a tax haven?” published in the “Business Standard” on 25th May 2023.
Syllabus: GS2- International relations. GS3- Economy
Relevance- Issues related to tax evasion, financial crimes and money laundering at global level
News– The article explains the issues of UK providing safe tax haven for high net worth individuals and extradition issues between India and UK
How is the UK a tax haven for high net worth individuals?
There are reports that wealthy families from Russia, China, and India buy expensive residential and commercial properties in London. They store huge amounts of capital in the UK’s overseas territories.
According to a British Broadcasting Corporation report on August 3, 2022, some Russians and other high net-worth foreigners have used “English Limited Partnerships” to hide the identity of the true owners.
The following study of the “Independent Commission for the Reform of International Corporate Taxation” is about how the UK’s laws and practices result in tax evasion
A Financial Times article suggests that there are benefits in setting up trusts in the UK’s overseas territories. The confidentiality about the assets motivates them to deposit large amounts in these tax havens.
The UK’s overseas territories which are popular with tax evaders are the British Virgin Islands, Guernsey, Gibraltar, and the Cayman Islands.
Currently the UK is harbouring high-profile Indians who have allegedly committed financial fraud in India. This is despite an India-UK Extradition Treaty.
One of several hurdles in getting criminals under Indian law back to India is that the offences committed in India must also be crimes in the UK.
Further, the European Convention on Human Rights does not allow extradition to jurisdictions where a prisoner may be held in degrading conditions, or may be tortured.
Lalit Modi, Vijay Mallya, and Nirav Modi have been accused or found guilty of financial fraud in India and have evaded extradition from the UK to India.
What are the financial crimes committed by these people?
Kingfisher Airlines have defaulted on borrowings of over 8,000 crore. It was sourced from several public-sector banks between 2004 and 2008.
Kingfisher Airlines was also reported to have deducted 10% tax at source from its employees, as required by Indian tax law, but did not credit these amounts to the government account
Nirav Modi obtained fraudulent letters of undertaking to misappropriate about 14,000 crore from Punjab National Bank.
Why is it an appropriate time to raise the issue of extradition of people accused for financial crimes in India with the UK?
In the May 2023 Northern Ireland council elections, the Sinn Fein party emerged with 31% of the vote, the highest. Sinn Fein and its supporters would like Northern Ireland to reunite with the rest of Ireland.
A unified Ireland may happen in another 10 years or less and all of Ireland may become part of the European Union. Scotland may leave the UK. It may join the EU.
India should focus on concluding a broad-based trade in goods, services, and investments agreement with the EU and delay discussions on any India-UK trade agreement.