REWIND

New Delhi, 20 October 2022

NEW INITIATIVE ON BLACK MONEY

By Inder Jit

(Released on 4 August 1981)

Mrs Gandhi has spoken not a day too soon on black money during her recent visit to Srinagar --- even if the remarks were brief and appeared from the Press report to be somewhat casual. Addressing a meeting of the Council of Ministers and senior officials of Jammu and Kashmir State, the Prime Minister indicated her desire to do something to tackle the problem of black money and said: “Any suggestions from the Chief Minister in this regard would be welcome.” Happily, a couple of Chief Ministers, including Mr Jyoti Basu, have already welcomed her statement and conveyed to New Delhi their readiness to meet on the subject notwithstanding widespread and growing public cynicism about pronouncements by top Government leaders at the Centre. Any Prime Ministerial statement on black money which indicates even a vague inclination to take a step in the right direction deserves to be welcomed normally and pursued vigorously. This should be so even more at a time when the situation has greatly worsened since the Public Accounts Committees of Parliament probed the problem and submitted a little-remembered but thought-provoking report in April 1979.

The Public Accounts Committee, then headed by Mr. P.V. Narasimha Rao, presently Minister of External Affairs, had the following to say: “The Committee are greatly disappointed to observe that despite the appointment of many Committees and working groups to study the problem of black money and suggest measures to contain it and steps taken by the Government in pursuance of the recommendations of those Committees etc the problem has, instead of showing any improvement, shown signs of escalation to very serious proportions.” (Mr Rao headed the Committee during the Janata rule in keeping with the healthy convention that its Chairman should belong to the Opposition). The PAC, which was reviewing the voluntary Disclosure Scheme of 1975, also strongly urged the Government to “evolve a concrete plan made important suggestions against the backdrop of an earlier PAC report of 1967-68. This report described “the present system of levy as onerous and complicated” and added that the “excessive rate of taxation” was leading to the generation of black money.

Mrs Gandhi returned to power not long thereafter. Her Government took an early opportunity to devote attention to the problem of black money and earlier this year came forward with its scheme of bearer bonds. Curiously, however, the Government completely ignored what had been recommended by the PAC headed by one of its senior Ministers, Mr. Narasimha Rao, and including at least two other leading lights: Mr Vasant Sathe and Mr Sita Ram Kesari. The PAC, it may be recalled, said: “The Committee recommended that the Government should take suitable drastic measures to tone up the Direct Taxes Administration rather than lean on schemes of voluntary disclosures which are of dubious value to revenue while they have distinct demoralizing effect on the honest taxpayer.” The PAC also added: “What has perturbed the Committee is that floating of one Voluntary Disclosure Scheme after another has helped in the creation of a class of tax evaders who have not only kept on concealing their income and wealth but have been taking advantage of immunities and concessions available in the scheme…. The number of such tax evaders is not small.”

The Prime Minister indicated at the Srinagar meet that she herself was “not enthusiastic” about the black bearer bonds but had decided to go along with the idea when “experts had convinced her about its efficacy”. She did not understandably name the “experts” in keeping with her style --- either in the course of her remarks or later. But in accepting the idea and implementing it her Government also ignored the final report of the Black Money and Direct Taxes Enquiry Committee, presented to Parliament in 1971. (The Committee was headed by Mr. Justice K.N. Wanchoo, retired Chief Justice of India, and included eminent economists and tax experts.) The Committee expressed itself clearly against voluntary disclosure schemes for black money and said: “Voluntary disclosures too frequently shake the confidence of honest tax payers.” It also turned its attention to suggestions for issuingbearer bonds to mop up black money and said: “The scheme is a poor substitute even for a disclosure scheme. The so-called benefits claimed for the bearer bonds scheme are illusory.”

That, however, is only one bit. The Wanchoo Committee, which went into the entire matter, made several suggestions for tackling the problem of black money --- and in its anxiety to serve the larger national interest even submitted an interim report in 1970 recommending some important steps of a radical nature for immediate implementation. Regretfully, no advantage was taken of the Committee’s speedy effort constraining Mr Justice Wanchoo to say the following in the final report: “After detailed examination and careful consideration, the Committee are still fully convinced of the efficacy and feasibility of the measures already recommended”. Worse, little has been done to implement the report and its weighty recommendations. Normally, the report of any important committee comprising eminent persons should be implemented speedily in any healthy, responsive democracy --- with or without change. The Government of the day has, of course, the right not to accept any recommendation which, in its judgement, might cause harm. But it must take Parliament and, through it, the people into confidence about its stand on the recommendations.

Parliament watchers, who have followed the proceedings of the two Houses closely over the past two decades, are still at a loss to know as to why the Wanchoo Committee report has not been implemented. The Government has all along asserted that it is unable to implement the recommendations. But no White Paper or anything resembling it has been issued to this day. (The Choksi Committee on Direct Tax Laws has not fared very much better. The Committee, which submitted its report to Parliament in October 1978, was set up to recommend measures to simplify and rationalize the direct tax laws with a view to making them readily comprehensible to the tax payers, reduced litigation and thus subserving the interests of the national economy.) Even now it is not too late for the Government to come to Parliament with a White Paper on the subject and benefit from the wisdom of the two Houes --- wisdom which would surely be much more than that of a score and more of Chief Ministers not all of whom deserve to occupy the chairs in which they find themselves today.

Some recommendation of the Wanchoo Committee have, no doubt, been implemented. But most of its analysis of the causes of tax evasion and the creation of black money and its proliferation are valid and weighty --- as also its proposals to fight tax evasion and unearth black money. “Tax evasion and black money,” said the Wanchoo Committee, “are closely and inextricably linked. While tax evasion leads to the creation of black money, the black money utilized secretively in businesses for earning more income inevitably leads to tax evasion.” Above all, there is urgent need to consider and, if possible, implement some of the “important steps of radical nature” recommended by the Wanchoo Committee in its interim report of 1970 for “immediate” action. Curiously, the Government has not yet made public this interim but important document. Says a veteran parliamentarian: “Either the proposals are useful or they are not. Had they been useless, the Government would have surely made them public. Clearly, there is no reason to keep them secret. Let the country at least know what the Committee’s eminent members had proposed. “

Many people all over India believe that our electoral system is at the root of the black money evil. Not a few argue that all would be well if only measures were undertaken to force political parties to submit their accounts for auditing and if the Government agreed to go in for public funding of elections. The Wanchoo Committee, tool devoted attention to the matter and said: “There is need to keep political parties free of corruption. Removal of ban on donations by companies to political parties is, therefore, not favoured. Nevertheless, it is an accepted fact of life that in a democratic set up political parties have to spend considerably large sums of money and that large sums are required for elections. As in West Germany and Japan, the Government should finance political parties.” The Committee also advocated the need to draw up suitable criteria for recognizing such parties and, determining the extent of grants-in-aid. But the three proposals by themselves will not help much unless black money and its generation is attacked at source through a well considered strategy.

The Prime Minister is assured of full cooperation from the bureaucracy and the public at large in fighting the evil in a situation in which honest people continue to be penalized; their real income have slumped and savings largely wiped out. Fewer and fewer Government servants are able to make their two ends meet and find themselves under increasing pressure to take a fresh look at the old saying: “Honesty is the best policy.” The situation for most people is becoming desperate even as the new class of “black rich”, an expression first used by the Wanchoo Committee and more appropriate in Indian conditions than nouveau riche are today wallowing in unprecedented luxury. In Delhi, the black rich have been known to pay as much as Rs.50,000 for just one wedding banquet in five-star hotels --- of course in cash!Interestingly, the Wanchoo Committee advocated a system of payments by crossed cheques for crossed bank accounts and recommended: “Endeavours should be made to evolve a new instrument in the form of a Bank Bill of Exchange which is not only readily transferable but also contains an obligation to be encashed through a bank account.”

There is no shortage of suggestions for dealing with black money. But the political will to implement them has been largely lacking for reasons which are no longer a secret. Mrs Gandhi should, therefore, take the earliest opportunity to call a meeting of the Chief Ministers and formulate measures to fight the evil without further delay. (Only Delhi and Chandigarh replied to the Wanchoo Committee’s questionnaire sent to all the State Governments and Union Territories!) However, before this is done, the Government should make available to the Chief Ministers both the interim and final reports of the Wanchoo Committee and the reasons that have prevented the Government from implementing its recommendations. The exercise should be followed by a full dress debate in Parliament --- preferably in the next session itself. Black money, as the Wanchoo Committee stated, “is like a cancerous growth in the country’s economy which, if not checked in time, is sure to lead to its ruination.” Much time has been lost already. It is now for Mrs. Gandhi to prove that she means what she says. ---INFA

(Copyright, India News and Feature Alliance)