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UPA’s white paper on black money a farce

Despite the massive levels of black money being generated, the Government has not been able to net the big fish in any meaningful manner. Therefore, the people have come to accept that scams have become a way of life in India.

The White Paper on Black Money that has been released by the UPA Government is a pathetic exercise in understanding, let alone tackling, the menace of black money. Anyone with a rudimentary understanding of global finance, national taxation and Indian economy would dismiss this document as the first draft of a junior under-secretary rather than a serious document of the Government of India on a subject that has been agitating the collective conscience of the nation for the past few years.

The document innocently assumes that black money is “income on which the taxes imposed by the Government or public authorities have not been paid.” It goes on to add that this definition of black money is in “consonance” with the definition used by the National Institute of Public Finance and Policy, which in turn defined black money as “the aggregate of incomes which are taxable but not reported to the tax authorities”, little realising all this is of 1985 vintage. In short, should the 2G Spectrum scamsters pay 30 per cent taxes to the Government from their share of loot, they can claim to have no black money.

Therefore, the real issue is not merely the payment of income tax. It is the source of illicit wealth — through crime, corruption and illegal commerce — that makes any such study, especially in the Indian context, completely riveting. In fact, black money — read untaxed income - is passé. Put pithily, modern Governments have to deal with ‘red money’, which is more complex in design, sinister in deed and debilitating in its impact than black money.

What is missed by the document is that the generation of this red money within India, its transfer abroad through hawala channels, converting such illicit wealth with the assistance of international banks in tax havens into illicit wealth, re-investing such laundered money back into India through specious instruments such as participatory notes and at times even as foreign direct investment are all part of an integral package, aided and abetted by policies of the Government itself.

It’s not a wonder that the alleged big daddy of all known launderers — Hassan Ali Khan — who, along with his wife and associate owes the Government in excess of Rs 70,000 crore, is conspicuous by his absence in this document. Naturally, without naming him (and his political masters), the document is akin to Hamlet without being the Prince of Denmark. Recall that even to this date the Government has not recovered a single rupee from the said bank accounts of Hassan Ali Khan nor has it produced any explanation as to his source of income in the first place.

What is worse is that there are several such persons that have laundered huge amount of wealth abroad, some known and some unknown to the Government. Some of these people are more daring and continue to operate without any fear, even within India. And a Government that is incapable of providing details even on one such person is the author of this document.

Quoting a World Bank study on ‘Shadow Economies’ of 162 countries from 1999 to 2007 the document notes that India compared “favourably” with other countries. But the UPA regime forgets that the global average had dropped from 34 per cent in 1999 to 31 per cent in 2007, while for India it has increased from 20.7 per cent to 23.2 per cent in the same period. Naturally a contrasting picture emerges — one where the shadow economies’ share of India’s GDP is rising in direct contrast to the sharp fall globally.

What is galling is that the document uses methodology used by economists and analysts between the 1950s and the 80s to capture the quantum of black money generated within our economy. It may be noted that most of these negative developments have hastened since the 80s when the Indian economy underwent mild doses of reforms. Contrary to the popular belief that liberalisation of the economy would prevent corruption, the deepening of the reforms process since the early 90s is seen as having increased opportunities of corruption.

The emergence of globalised corporations with huge financial and political powers disproportionate to the power of our Government has provided an impetus for a very high level of corruption. To this extent the document is fatally flawed on its estimation of the quantum of black money generated annually and transferred abroad, especially using antiquated methodologies.

In the Indian context, there is something more: Despite such massive levels of corruption, we have not been able to nail the big fish in any meaningful manner. Therefore, it is rationalised that scams have become a way of life in India. This indicates massive levels of corruption, the availability of irrefutable evidence and the impotency of the law enforcers. What is traumatising the collective conscience of the nation is the fact that the judicial system has been unable to convict anyone from our ruling elite, despite overwhelming evidence available in such high-profile cases of corruption. The White Paper is tellingly silent on this particular aspect.

On the issue of this illicit wealth abroad having returned to India through the obnoxious participatory notes route, the document is mischievously misleading. Recall that the 2001 stock market scam, which ultimately led to the formation of a joint parliamentary committee, was in effect a participatory notes scam. Repeated assurances from market regulator Securities and Exchange Board of India that participatory notes are well regulated is akin to the assurances from the ISI that it does not indulge in any terror activities. Worse, the White Paper seems to make a virtue of this instrument by impishly suggesting that substantial money parked outside India has returned to India through this route.

If that is true, why does the Government not act against the participatory notes in question?

http://www.dailypioneer.com/columnists/item/51710-upa%E2%80%99s-white-paper-on-black-money-a-farce.html

Last modified on Sunday, 07 July 2013 07:36

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