Unearthing Black Money: Start with election affidavits

1st appeared as an OpEd in the Heraldo

The demonitisation policy was touted as the biggest move in India’s history to break the back of the black economy and as a bonus the counterfeit currency would take a hit. A master stroke which would kill a minimum of two birds with one stroke. The counterfeit industry would have surely taken a hit and it will take some time to generate new genuine looking counterfeit notes, ofcourse good photocopies are already available.

The many unscrupulous bankers colluded with the cash hoarders and the demonitisation policy failed miserably with just about 3% of the old notes staying out of circulation, this means that the effort to hit the black economy failed miserably. It succeeded in creating hardships for the common man and the common man’s sacrifice has come to nought as the objective was not met. Infact the cost of this operation will be even higher than the 3% which was shut out.

The Government is not very happy with the situation, so to try and pull back some of the illegal cash that has slipped thru the dragnet, the IT department has gone into overdrive to seek out the black money. They have received lacs of responses which they have to go thru and that would be akin to searching for a needle in a haystack.

However, one wonders why the Government is looking at such methods, there are simpler ways to get to a major portion of the black money generation and owners, the politicians. It is an open secret that this strata of society is responsible for generation i.e. fees under the table for permissions have to be paid in cash so that they can use their discretionary powers and any and every contract usually has a kickback component. Thus they also accumulate this cash all the time and appetite is insatiable. Yet there is not a single action that would attempt to get at some if not all of the black money from this class. The 80:20 rule is pretty much applicable, 80% of the black money will be with just 20% of our ruling class.

The recent elections saw all the aspiring candidates file their affidavits of assets and liabilities and rather than shift through lacs of explanations of why “X” deposited “Y” amount of cash which will take forever, the IT Department should check out these affidavits especially of those standing for re-election as they can easily have a compare affidavits and see where there is evasion.

Let’s take an example of Mr X. He has stood for elections in Goa in 2007, 2012, 2014 and 2017. He lost in 2012. His net worth increased 80% in 5 years.ie an average of 16% /year, during the period he was an MLA. However, post his election loss his net worth increased by an average of just 1%/year. Surely his salary as an MLA could not have been the contributing factor to the phenomenal growth of his net worth when he was an MLA. In 2014, MP election his income as a non MLA dropped to 62 lacs against 1.6 crores he showed in his IT return for 2010-11. In 2017 his income in the IT return drops to a mere 27 lacs?

Lets take another example Mr B, a sitting MLA. In 2007 he was a small time businessman with almost nothing to his name, even his qualifications he subsequently watered down. In 2017, he realised he had brought an apartment in 1993. Do these affidavits have any sanctity? By the end of his first term he had tripled his assets, and multiplied these assets an astounding 6 times in the last five years. Just bank deposits went from a measly 5 lacs to 1.5 crores. His income increased 50 times from 1 lac to 50 lacs. He even managed home loans from LIC and the Goa Legislative assembly while the affidavit dose not reflect any such home. Does the Legislative assembly not keep proper track why the loan is sanctioned? The market value of an asset goes up seven times with three years when for all practical purposes real estate has been flat, was the acquisition undervalued? We could go on.

There seems to be a direct corelation between income before and after becoming and MLA. The IT department is always looking for sudden spurts in income or assets and that is why they have raised questions on the cash deposits. So should they not be studying the affidavits of MP’s/MLA’s to start with and then move on to MLC’s and Panchayat members?

There are some gaps in the information asked for in the affidavits, for eg: Only income declared in the last IT return is mentioned, they should provide details of income for each year if a person was previously elected. The investment in insurance is a grey area, why not ask how much was invested in insurance every year? While the cost of acquisition is mentioned, what is not mentioned is the market value at the time of acquisition.

While most businesses had a hard time maintaining their bottom lines in recent times but for our MLA’s that is a small matter, they turn into King Midas once they become MLA’s and better if they are Ministers. Maybe a few are good businessmen, but to believe everyone of then is honestly earning the huge increase in income and assets is to be surely naive. So in keeping with PM Modi’s intolerance towards “kala Dhan” the focus should shift to screening elected representatives and ensuring that the black economy is tackled from the top and not starting with the common man. A good IT officer will do a much better analysis and unearth much more if allowed.

Acknowledgement: The data it readily available on the website of Association for Democratic Reforms. www.adrindia.org

Matka: Why Not

1st appeared as an OpEd in the Heraldo

A public spirited citizens appeal to the court has sparked a renewed debate on Matka. Once the court took notice, there has been a flurry of activity with the police arresting so called Matka bookies in what one can term Non Value Adding (NVA) activity. In industry NVA is sort to be eliminated as the name suggests doing that job adds no value, hence arresting these so called matka bookies is absolutely useless as the arrest will not stand the scrutiny of the court and after a few years the accused will be acquitted.

The police know about the existence of the matka outlets because when they go on their rounds surely they will see the classic matka booth, a low box table with sides high enough to conceal the transactions from prying eyes walking along the road. The police have not learnt or do not want to learn from previous acquittals. They catch a person with chits, some cash and lock him up, report the numbers to the press. For a few days it is holiday time for the matka business. In court they will be asked to present witnesses and they will have none, the cash they say is for a bet, but they do not have anyone who placed the bets in custody, you need two hands to clap right, and finally they cannot prove that the money seized during the raid was used for gambling.

If the police had the will they can ensure a conviction, marked money and decoy customer routines are well established in raiding suspected institutions. One cannot blame the police as they are taking the blame for the entire system that actually supports the matka business. They are just one part that is forced to act because the judiciary has intervened and in a way has promised to commission a special squad to investigate the matter if the police cannot. Maybe in a bid to pacify the court and show that action is being taken, the police launched this half hearted drive which will last but a few days before everything goes back to normal.

The solution is to allow matka to function openly. We have allowed casinos, we have allowed lottery’s and every State has its own lottery, we allow clubs to organise bingo, so where is the problem. The official problem is that Matka spoils families because winners of poor families get addicted and drive the family into debt and penury. Surely this oft repeated and half baked argument against matka will hold for casinos or any other form of gambling. The stock market, after famous crashes do we not hear off suicides by punters who lost heavily. Why is there no talk of making investing in the stock markets illegal? So why apply it only to matka.?

The other unofficial problem is that currently keeping it illegal or not official forces those who run the matka operation to “oil” the system to prevent hiccups. If matka is made legal this oiling will stop and huge revenue would be lost.

Gambling is something that each individual has to decide if he wishes to or if he can afford to indulge in. There is no way the State can stop a person wanting to gamble, or for that matter drink. Within days of the Supreme Court decision to ban bars on highways, accidents in Goa claimed eight people in one day. So be sure, matka or no matka people are going to lose their money in one way or another.

Look at the positive contribution of matka. First, it is an additional revenue stream for the shop keeper, at no additional cost. If it was legal he could keep operate it from within his shop as if selling any other ware. Then there is employment. Matka employs many otherwise unemployed youth and since they are not cheating anyone, it is a good clean income. The matka trade is known for its ability to deliver winnings without any default. This itself should be a plus point. So even if it does not contribute any taxes to the State it is doing the State a favour by providing direct employment to thousands. These people in turn will spend their earnings and the economy gets a boost and that adds to the indirect tax kitty of the State.

Given the situation, why does the State not move to make life easy for everyone and legalise Matka. There is actually nothing they have to do, is there any specific law that governs bingo or marbles for that matter. Let the people play. Automatically the “better/player” will go to an outlet which gives him an official receipt and the results will be posted as a printed list or as an advert.

The Matka papers will benefit as other related establishments will begin to advertise. If there is a dispute it can go to the consumer forum and the only time the police will be involved is if there is a fight where law and order is breached. If a player wins big he will include it in his tax return as done by casino players, it is small he will just let it go. Once in the open and transactions are official TDS can be deducted on payouts, which will accrue to the Government as most of the winners will be in the exempt bracket, and it they pay taxes they can take credit.

Make matka legal and save the courts time and energy, police can focus on catching criminals and ordinary citizens can relax and bet. It is win win for all.

Hail Taxi’s, Hail Hitler’s

This 1st appeared in the Herald dt 19.05/17

The reality of living in a part of the world where a fair taxi system is absent, was once again brought home during a visit to Hyderabad. On arrival at the new airport which is a good 40 kms from the city, there was no tension. Signages inform you to check one or the other taxi app. For those not tech savvy there are prepaid counters.

While waiting to collect the checked luggage, the taxi is booked on the app. Once the driver confirmed we were his customers, using an “OTP” he loaded our luggage and then switched on the meter. Strange in Goa, at the prepaid counter one has pay extra for bags. The taxi was comfortable and air conditioned, if I was wondering if I had to pay and arm and a leg like one does in Goa, there was no need for anxiety, the app had already told me the ride would cost between 700 to 750/-. A steal considering that to get from the Goa airport to Verna Industrial Estate in a non AC cab one shells out almost 500/- for 10 Km.

The almost one hour ride was interesting, apart from seeing how Hyderabad had changed since my last visit 15 years ago, it was a chance to interact with the driver on his experience with Ola. He drives during the day for 8 to 10 hours and he has a driver who takes over in the second shift. No time to sit around and play cards for sure.

His driver is paid 1500 per shift. If the cab clocks Rs 3000 in terms of fares, Ola pays the owner an incentive of 3000/-. This from Ola’s point of view ensures that the taxi’s are available as much as possible so customers always have a ride no matter what time of day. There are other slabs of incentive. Each a little lower, the minimum seems to be 1200, below which no incentive is payable. The catch however is the customer rating. If a customer gives a bad rating to the driver assuming he was rude or drove recklessly etc, the driver loses his incentive for that day. So drivers I noticed in my next few rides were careful. No signal jumping etc.

Once the customer has chosen his destination and if the taxi goes ofcourse, immediately there is a call from the control room to check if everything is OK. So one can be taken for a joy ride, in Goa this does not happen (brownie points for the goan taxi) because the exorbitant rate is fixed first so no point in driving in circles to make the meter show a higher fare.

Another advantage with apps, one can compare rates, since the estimate is given when you make the booking, one can choose the cheapest fare going at that time. The aggregators also make offers which can make the ride cheaper for a customer and also benefit the driver. The fare back to the airport was almost double, the reason it was cheaper was because the operator had an offer. The benefit for the drivers is that he gets a fare from the airport faster rather than waste the whole day waiting. Is this not something the goan taxi’s should agitate about. They go to Calangute and return empty, why not be able to pick a fare from Calangute to the airport. This has two parts, one is statutory, some archaic law prevents this as one assumes it denies a local taxi of his fare in Calangute and two technology, how does the driver know who wants a ride back to the airport. This is where the app helps, it puts the driver and customer on the same page.

Today, in Goa to get a taxi or even a richshaw for a short distance it is impossible, and even if the driver decides to take you, it is a favour for which you will have to add a premium. With an app based service this is not an issue, when the driver accepts your request he does not know where you wish to go till he arrives to take you, so there is no question of turning down fares based on distance.

With cashless payment options there is no issue with change, the money just gets deducted from online wallets once the ride is closed.

So, is it all one sided, no drivers can rate the customer too, and if the customer has a poor rating because of boorish behaviour, the driver seeing a customer’s low rating can decide not to accept his ride. So customers cannot behave badly and keep riding.

Because it is so easy and reasonably cheap, the number of people using ride hailing apps has increased drastically, more customer means there is a need for more taxis, car owners are preferring to use taxis to avoid the hassle of parking or driving after a drink. The market size has increased. This is an opportunity, not just to become a driver but to own your own car, the EMI’s are paid from the earnings and why one, they own several. The ride hailing app is an employment generator.

The aggregator takes 21% for his services, mind you 1% is TDS, this means that the drivers come into the tax net and become responsible citizens. Most ride hailing apps are possibly foreign owned. The myth being spread by local taxi unions is that outsiders will come and enter the taxi business, this is far from the truth, it is local who will sign up and be part of the system. Ola and Uber do not import drivers.

Hopefully good sense will prevail among the decision makers and they will decide in favour of the State rather than a few votes in their individual constituency.