Economic Highlights

New Delhi, 28 January 2011

Black Money Everywhere

 GOVERNMENT LACKS WILL

 By Shivaji Sarkar

Two rare challenges --- the rising prices and tackling black money --- are being dealt with kid gloves. A still more dangerous game is on to treat kickbacks and criminally-earned money at par with the legally and ethically earned.

One needs to ask, while money is pouring in the country from all sides, whether a Reserve Bank monetary policy to suck in liquidity could control inflation? The Government knows its futility, but would not take action against the hoarders and manipulators generating black money by manipulating prices as much of it goes to the benefit of those who are close to the powers.

Further, it also questions the Government’s income-tax policy. A debate must begin on this critical issue. Can taking a bribe be just treated as an extra-concealed income? And treated as a mere tax issue, as Finance Minister Pranab Mukherjee, has tried to do this week. Should the criminality in it be over-looked?

Unfortunately, the argument for the Finance Minister’s statement was laid by the Income-tax Appellate Tribunal which revived the Bofors kickback issue. The tribunal held, “Bofors should have reduced (not eliminated) the commission paid from the contract price. This made the Government pay about Rs 41 crore in excess, in the Rs 1,437 crore deal, which was passed to Win Chadha and Quattrocchi against terms of contract”.

Would the tax paid on the sum, as the Appellate has tried to do, end the issue? The Tribunal detected an attempt to obliterate the money trail by opening a series of bank accounts and dismissed the appeal for waiving tax claims of Rs 52.85 crore from Win Chadha.

True, the Finance Minister enumerates some steps to combat the menace of illicit funds “generated both as a result of tax evasion and corruption”. But this virtually dilutes the issue of corruption. Evading tax because of too high rates needs for a policy review and simplification of the process. The Direct Tax Code (DTC), supposed to have done it, has further complicated the issue by further empowering the tax officials. Even Mukherjee admitted that as Minister he did not have powers that a tax official enjoyed.

Clearly, this is dangerous as it generates illicit fund for the people, who are supposed to check it. A number of officials have been held for such action recently. Tax evasion by some film actresses and criminal action whether by Chadha or the Pune businessman Hasan Ali involved in gun running and laundering money from terrorism should not be treated at par. But this is what the Government is seemingly doing.

Besides, every year-end the tax department since 1960s comes out with a list of cine actors supposedly evading tax. In many cases, they do not tell the people that the amount is in dispute and they were carrying out the so-called raids more for a publicity blitz. Targeting artistes is easy also. In most cases the issues have been settled as artistes pay the tax. Why are they being given a bad name?

Having seven houses to save tax is a crime or not needs to be examined. Artistes do not earn money at an even rate through their life. For decades, there have been suggestions to give them some concessions as the State does not take care of them when they are reduced to penury. Be it erstwhile leading actors Bhagwan, Shetty, Kesto Mukherjee, Leela Mishra or Nimmi.

In the case of Chadha and Hasan Ali, the Government expresses helplessness. Mukherjee had nothing concrete to say about action against Hasan Ali except, “We are examining”. The simple question, why he was arrested merely for violation of the Passport Act and not terror links remains unanswered.

Different approaches to treat different people would possibly never solve the issue of black money, for which the Government has no estimate. It varies from $ 400 to 1400 billion as done by BJP Task Force to $ 462 billion of the Global Financial Integrity.

In reality, it is much more. In many offices including courts, people charge for doing what they are employed to do. They take the money openly. So do policemen from truckers and gullible citizens all over the country. Nothing moves unless illegal fees are paid in several civic bodies and other offices. Every a poor vendor, rickshaw puller or a prostitute have to keep many people happy. Even registration of land or a house is not possible unless palms are greased for getting the papers back. Now, even bank employees have joined the league.

Every day at least Rs 5,000 to 10,000 crore is generated in this kind of black money, Rs 15 lakh crore a year at a modest scale. Has anybody heard of a concerted move to eliminate this? Recently, a thief was caught with a bag having Rs 50 lakh in Ghaziabad in UP. The thief said that he had stolen it from a nearby house, which belonged to a clerical staff. As the police landed there to inquire, the clerk said, “It cannot be my money. I have never had more than Rs one lakh in the house”.

The issue is not about the 18 tax evaders in the list provided by Germany, whose names the Finance Minister asserts would be known when the income-tax probe begins. There are many such persons. The agenda of the multi-disciplinary committee to get studies conducted to estimate the quantum of illicit fund generated by Indian citizens needs to be widened to include many spheres of activities, which are known but ignored. Just targeting funds abroad ignoring the sources within the country could not be a viable solution.

India signed along with 144 countries the UN Convention Against Corruption in 2003. But while others have ratified it, our Government is still dilly-dallying on the issue. Importantly, some countries, including Switzerland have told the Government that they could share the names of accounts holders in Swiss banks but little effort has been done to accede that.

Thus, Mukherjees’s five pronged strategies appear cosmetic. Legally earned money turned into black is easy to tackle by bringing down the tax rates and threshold limit, rationalising land registration and similar other systems. The DTC calls for a re-draft as it has not addressed these issues.

However, the criminally earned money has to be tackled strongly and not merely be treated as a “tax-evasion issue”. The nexus here is too wide. They function like a mafia and have penetrated the Government. It requires political will to deal with it. Will this nation ever have it? ---- INFA

(Copyright, India News and Feature Alliance)