Home BUSINESS National Black money & Corruption: Who is to blame? -- 2

Black money & Corruption: Who is to blame? — 2

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World over only middle class in any country demands dictatorial regime as they did in Germany and Italy in the first half of the last century. Even in India, the middle class was overjoyed at imposition of the emergency regime in June 1975 as clerks in government offices were seen in their chairs instead of playing cards for two hours extending their lunch hour in lawns outside the government offices and trains were running on scheduled time tables but for only six months. Only after six months they realized their folly as they lost access to the top political system to air their grievances and bureaucrats ruled supreme. The Press censorship had closed their avenue for reaching the top with their grievances.

There is a false belief that the British regime under the East India Company was not corrupt. Lord Clive, governor general in India for two terms had to face courts in England on his return to explain the unaccounted wealth he had brought with him. Most officials carried back home much more than their legitimate earnings after their posting in India. Yet there were cases when Indians did prove they were more honest like in 1860 when business class in India had shut their establishments to protest against the new rule for examination of their account books by the British officials to ascertain correctness in income tax returns filed by merchants.

The British regime for the first time imposed income tax on business class in 1958 to recover costs of expenditure and damages suffered during the armed rebellion by Indians in the British army in 1857. Two years later British officials were authorized to verify returns. The Indian merchants shut their shops. The governor general convened a meeting to understand grievances for protest of this kind, and Indians told him that they resented the order as it treated them to be dishonest. They paid tax without protest but resent being treated as dishonest. The governor general withdrew his authorization order immediately as he saw the logic behind the argument. However the Government of India run by Indians revived the same order in 1952.

The tax officials were not only authorized to examine books of accounts but also empowered with triple role of investigator, prosecutor and the judge to every case that came in his circle. There was little scope for redress against as the higher appellate authority in the tax department was loaded with heavy work. Going to courts entailed higher expenditure that greasing hands of the tax officer to make him withdraw or alter his judgment and thus scale down the tax burden and penalty. Every finance minister was aware of prevalence of rampant corruption in tax enforcement mechanism as routine captures of bribe taking officials indicated.

Vishwanath Pratap Singh as finance minister in the Rajiv Gandhi government sought to vest more power in hands of tax officials. He was seeking to enhance his image as the most honest politician by letting loose the officials on the business world, especially in Mumbai. He had even told the prominent journalist then that he would annihilate as all industrialists in Mumbai as devils of the Indian republic. The stiff opposition from his minister of state BK Garhavi frustrated his effort to provide more teeth to the officialdom that was known for its corruption.

Some industrialists were taken in custody. Among them was SL Kirloskar who had enjoyed high reputation for his welfare work for uplift of women, in particular in Maharashtra. He was also known in Germany for high reputation for having used his wealth for social work. He was put in police custody for a minor infringement and old man of 80 years refused to seek bail. An industrialist from Germany on visit to India as a part of delegation under the industries minister was tempted to ask, “What is bad in India, the law, the government or the industrialist?” On questioning he explained the rationale for his question, “how can a reputed industrialist at the age of eighty be made to spend a night in custody unless one of three was bad?” His question showed how outsiders interpret actions inside India. What kind of reputation would be built when politicians in power continue to hammer day in and day out their accusations of corruption?

There is no doubt prevalence of evil practice of under invoicing of exported goods and over invoicing of imported goods to keep foreign exchange outside India. The prevalence of such practices was high because of restrictions on imports during the first two decades. There was a regular market for sale of import permits at high premium. So also air passengers attempted to smuggle in goods in their baggage. Regular catch at air ports were evidence though catches were a minuscule in relation to infringements proportion as most escaped punishments by parting away parts of their smuggled goods. Even gold smuggling was reduced from its proportion in 1966 to virtual extinction in the current century as the government allowed some imports as regular part of baggage for passenger returning home. Reduction in illegal imports of prohibited items was mainly due to removal of several restrictions and also due to easy availability of similar standard products in India. In 1960-70, virtually every passenger returning to India carried a tape recorder cum radio in hand to pass through the customs bridge at airports. Now no one brings even laptop. It suggests that restrictions lead to illegal activities. Gold purchase has not reduced by Indians, only difference is now they do not seek their purchase from smugglers.

In olden times, traders used to help known and also unknown needy with financial assistances that were not put in their account books. Thus unaccounted part of profits was necessary even at times when Income Tax was not levied by law. The share of unaccounted money multiplied with law enacted in November 1969 to prohibit company donations to political parties. Ashok Mehta, one time confidant of the Prime Minister Indira Gandhi, warned her that the new law would result in generating black wealth in ample measure and it would pollute the politics. However Indira Gandhi cared the least as her main intent behind the law was to starve her opponents of funds for the elections. Fears expressed by Mehta came true with black money playing a vital role in politics to change the basic structure of parties. Now every party uses black money to pay for services that cannot be put in account books.

Way back in 1994 a retired Swedish diplomat spilled the beans and alleged that Indian money worth about sixty thousand crore rupees was stacked in Swiss banks. He did not reveal how he got hold of the information from impregnable secrecy maintained by the Swiss banking system.

Corruption was again used as a major political weapon in the 2014 elections after an unknown American agency leaked out reports of enormous sum of rupees six lakh crore stacked outside India. On the face of it was impossible to believe that Indians were so stupid as to keep such a huge amount stacked without expecting handsome returns that they can get elsewhere through investments. On the contrary they have to bear costs of maintaining their deposits in safe custody of Swiss banks as one has to pay for hiring the safe deposit vaults.

Instead of pondering over the impossibility of the very idea, it was used as a political weapon to blame the Congress as the party for siphoning off Indian funds abroad. The main campaigner for the BJP even promised to bring back the stacked money. But disappointment awaited as the government could not locate the stacked black wealth in banks abroad. Tax sleuths made efforts to get in the secrecy network but without success except revelation of amounts held by non-resident Indians in the Swiss branch of the Hong Kong bank. Amounts did not measure up to even a per cent of one per cent of the claimed amount of Rs. six lakh crore.

(To be continued)

Vijay Sanghvi
Vijay Sanghvi
Political Commentator and Analyst Vijay Sanghvi, 81 has created a niche for himself as a seasoned media person with proven credentials and political, economic and social analyst since 1962. Sanghvi worked for five years in Mumbai for Gujarati papers before shifting to Delhi and continued to work for various dailies in Gujarati, Marathi, Hindi and English as well as for international media. He has many newsbreaks to his credit as well as inside view of many epoch making events. He covered parliamentary proceedings from 1967 till 2007.

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