Biz@Blaise Black money Red Herring

Since his swearing in ceremony, PM Modi has impressed with his out of the box thinking. Was disappointed when in his latest Radio address, he has promised the country he will bring back poor people's money stashed away in foreign bank accounts.

First of all, whatever money is in politicians or bureaucrats secret and illegal accounts, it is surely poor people's money and belongs to all Indians. Money of rich businessmen in these accounts is partly due to us Indians, ie tax portion. My argument is with the end being attacked. Why are we focusing on bringing back money stashed abroad, why are we begging some countries to share information which is outdated at best, so much noise over the bank lists and then it is said they pertain to 2006.

We must focus on activities at home that generate this black money, a fraction of which then finds its way to a foreign bank. Ofcourse from these foreign banks the money is rerouted into India through channels in say the Cayman islands or other tax havens where no questions are asked. They thus legitimately enter back into India as FDI, PN or real estate. Some of it has even come back as RDX and that is why every right thinking Indian has to guard against black money. It may look like it is just another parallel economic activity to avoid paying tax on hard earned money, but it also opens doors for many antisocial and anti national activities.

If one has to target black money creation at home, one will seriously have to look at 1) Corruption : The principal generator of black money is corruption, it is the root of all evil. The new initiative to focus on MAKE IN INDIA and simplify paperwork will have an impact on reducing avenues for corrupt officials to make money. However reducing avenues for our politicians to make money is more difficult. Look at how every political party has opposed the EC guidelines to bring transparency into the system of political contributions.

2) Real estate business: by its very nature is most prone to dealing in black money. So much so that even salaried people have to convert white into black to be able to do a transaction. In Goa, we could have reduced the avenue for corruption in land conversions by adopting the regional plan but as you will notice it is not happening. Do not blame only the politicians as this flux situation surely benefits some vested interests who are not politicians.

3) Front companies are a bane, Just before the radio talk the PM asked banks to spearhead the search for money hidden behind a veil of subsidiaries and trusts. The new Companies Act has plugged many loop holes which were exploited in routing black money back into the system though a maze of subsidiaries. In the Jaylathia case the Judge referred to her numerous accounts to facilitate the movement of cash. This two pronged attack is a step in the right direction.

4) Tax Structures: The high incidence of tax makes people try and avoid paying. On the other had the penalty for not paying tax appears to be a slap on the wrist. So it makes evading tax lucrative and high return. Then there are issues like no tax on farm income, the only beneficiaries as farmers are genuinely poor are politicians who show huge as farm income. In Goa we use trawlers, you will notice that the fish find only politicians nets as rest of the fishermen do not make as much money selling fish. If the trawler owning fisherman looses the election his fortunes with fish also seem to change, fishy world.

These issues need a change in attitude in order to be addressed. The change in attitude is what Goa CM Parrikar has in mind but unable to practice. ZERO TOLERANCE to corruption. The reality is even if he catches someone corrupt he will prefer to transfer the person as proceeding is very tedious and time consuming. The famous Jayatiltha case went on for close to two decades and seems to be a first, while we all know there should be many more CM's in the same position. Zero Tolerance should include a harsh jail sentence, confiscation of property and speedy completion of trials as is being envisaged in rape cases. Not some silly penalty, a few days in jail and rest of your life to enjoy the spoils.

Zero tolerance would then mean that each individual feels it is his or her responsibility to curb black money/ corruption as it is anti national. They would compare the list with the facts on the ground and report assets held in benami names or which are not disclosed. No question of harassment, as once pointed out it can be quickly concluded by checking financial history if it actually belongs to the person or not. If yes, what is the source of income? If legitimate no issue, if not big problem. So simple.

In short if PM Modi is serious about money stolen from poor Indians, he should focus on the areas where the money is stolen, and stop or make stealing difficult and not where a small part of it is stored. This is India's biggest problem which he seems willing to address. If he does manage, it will make him one of India's greatest Prime Ministers.

Fightng Black Money is Like asking fish to dry the pond

The Lok Sabha debate on black money was a waste of time. The Finance Minister kept repeating himself, if the names of the account holders were to be disclosed in violation of the treaty, no country would share any information and if there were any evaders in the list they would get be free.

Waste of time because every political party starting with the Congress, every few minutes one member would rise say the same thing, the explanation was not satisfactory so we are walking out. Really, the Congress was at the helm of affairs when this issue surfaced. Could they not throw light on the issue which they want us to believe the Government is hiding and is a list of just 427 names worth walking out for.

 

Assume all 427 are guilty, will penalising them or putting them in jail going to rid the country of this menace. Their major point was that the BJP promised results in 100 days. The fact that black money abounds and most likely given the situation in Goa, most of it will be in the hands of ruling politicians. Ofcourse, you can hear them say in one voice, if proved we will resign. In short the debate in parliament to me was an eye wash.

While the BJP has a point, disclosing the names will not serve any long term purpose, on the other hand surely they can go after some of the black money still in the country. Or can that happen only after the 427 names are cleared.

Black money is of two types in my opinion. One which is unaccounted after a legitimate business transaction. Quite a few businessmen generate cash income which is taxable but they prefer to avoid paying income tax, so they would have broken the law. This should not be a priority. Given the increasing level of IT usage, KYC norms, requirements of PAN no etc, slowly but surely the net is widening to encompass such evaders. Increasing consumerism is pushing the cash out. Today people who have it want to flaunt it. 

The more serious and dangerous black money is generated by corruption. This is what can be termed as anti national and deserving of the quick and harsh punishment in say Singapore. We do want to be a tiger economy like Singapore, but without the hard rules. The Mumbai bomb blasts showed how a few corrupt officials allowed death to pass by them for a few rupees, assuming it was just another consignment of drugs or gold, not realising it was RDX.

We have corrupt politicians who have no qualms about selling the countries wealth just so that their nests are feathered. Watching them we have our bureaucrats who also guide and act as enablers to help the politicians. Today, they do not need businessmen, politicians have become businessmen, going by the number of crorepatis in Parliament. The few who oppose the politicians nefarious designs are shunted around a la Kiran Bedi.

We can surely not expect politicians to address this issue because that is like asking fish t o dry the pond. They will do anything for votes and another politician can be useful especially if he has corrupt baggage. The general defense is there is no proof, or if implicated the charges are assumed to be politically motivated. 

In Goa, the BJP rose to power and there are great expectations of change. Three years on that expectation is still waiting to be fulfilled. There were a number of scams, yet today not one has seen the light of day. To be fair, one officer in GIDC was terminated. What about the others, did he act alone? There is a clear cut case against the previous Chairman of GIDC, yet no case is registered. More like dangling the sword has more value than striking. The same situation exists in the mining cases, now the figure is down to 3000 crores, great can we see some action, surely it did not happen without political support. This refusal to act against the politicians is a national malaise. The Jayalatha case was significant because it has bucked the trend. If every prosecutor or investigating agency did their job as well as the people involved in the Jaylaltha case, we would see more convictions. Once we have more convictions we will see a reduction in corruption, if not it is a gamble with no down side.

A government employee facing a disproportionate assets case, explained his source of income as fees for performing religious services. Either he has to charge a huge amount per session or he has to be doing it full time. Both are not feasible, so obviously it is income from another source. Can the investigator not question those who are reported to have paid the fees and conclude if the source is genuine or not. However this is the trend, politicians show income from farms, fishing trawlers and hotels. Yet full time farmers commit suicide and trawler owners regularly ask for governmental assistance in the form of diesel subsidy and non politician hotels never have 100% occupancy.

This illegal money turned into legal money is then used to invest in other legitimate business. It is literally cocking a snoop at the anti money laundering act and laughing all the way to the bank.

PM, Modi is doing away with archaic laws, one he must look at seriously is the law that makes paying a bribe a crime. It should be repealed and only receiving a bribe should be a crime. Will he have the political will to do it? That would make a difference in the fight against black money not a debate.