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Mainstream, VOL LII, No 44, October 25, 2014

BJP’s Volte Face on Black Money

Friday 24 October 2014, by Barun Das Gupta

It is becoming clearer by the day that the Congress and BJP are the obverse and reverse of the same neo-liberal coin. Finance Minister Arun Jaitley’s latest statement that the identity of those Indians who have stashed away billions of dollars of black money in foreign banks, defrauding the people and the public exchequer, cannot be brought back because of legal difficulties only confirms it. It needs to be remembered that black money was one of the key issues on which Modi, Jaitley and other BJP leaders fought the Lok Sabha elections and sought to put the Congress-led UPA Government on the dock.

Now the same Jaitley has taken shelter behind the same arguments that his predecessors Pranab Mukherjee and P. Chidambaram used to trot out as Finance Ministers. Jaitley now says that under the Double Taxation Avoidance Agreement, confidentiality (as to the identity of the black money holders) has to be maintained and the names revealed by the German authorities could be made public and be used only for tax purposes. The names, Jaitley says, would be revealed once charge-sheets are filed which means a lengthy legal process.

The simple question is that as the BJP’s top legal luminary and as a veteran Member of Parliament, was he unaware of this conditionality? Did he stumble upon this fact only after becoming the Finance Minister? Let us recall what Modi had told the people during the poll campaign. On February 12 this year, on a chai pe charcha discussion, Modi said, according to a newspaper report,

He was committed to bring back black money stashed abroad and assured people that if the BJP was to voted to power, he would set up a task force, amend laws and distribute the money brought in as ‘gift’ among honest tax-payers.

The whole country is worried about black money. “It is an anti-national activity . . . For bringing back this black money, you require a political will. I give an assurance to my countrymen that when we will form a government in Delhi, we will create a task force and if necessary will amend the laws.

“We will bring back each and every penny deposited abroad by Indian citizens. I am committed to this because this money belongs to the poor people of India and no one has the right to do this kind of anti-national activity.”

This is a straightforward statement without any ‘ifs’ and ‘buts’ about it. There is no mention that his (would-be) government would be circumscribed by any confidentiality clause.

Now about Arun Jaitley. As recently as on July 25, after taking the office of the Finance Minister, Jaitley said on the floor of the Lok Sabha: “Prime Minister Narendra Modi’s government was moving fast on bringing back the ill-gotten money stashed away by Indians in tax havens abroad.” He went on to say: “I can assure you that you don’t have to wait for long to see that we have brought back the black money. Our government has formed a Special Investigating Team (SIT). If the SIT wants to take steps, the government will give full cooperation. Whatever information we are getting, we are giving that to Supreme Court as well.” That was in July. Now three months later in October he has discovered that the information cannot be revealed due to the conditionality clause and used only for taxation purposes and that, too, only after charge-sheets are filed at some future point of time.

On his part, Modi also held out a carrot to the salaried classes, telling them that whenever such money is brought in, five to 10 per cent of it will be given as a ‘gift’ to them because they earned fixed incomes and paid taxes honestly. That was in February, in the thick of the election campaign when he needed votes from all sections of the people.

It is only now that the people are realising that during the poll campaign they had been taken for a ride by Modi and his likes. The promises that were made to them about black money were hypocritical and insincere. These were meant only to win the elections. The black money holders’ names cannot be disclosed for the simple reason that these were the people—industrialists, businessmen, corporate bosses—who had spent thousands of crores of rupees through the print and electronic media controlled by them to mount a high-voltage propaganda blitzkrieg to carry the message to the people: ab ki bar Modi sarkar. Forfeiting the support of these honourable benefactors would be disastrous for Modi and his party not only in future elections but also during his five-year-long tenure in power which has just begun.

But what about the amount of black money deposited by the dishonest businessmen and corporate bosses in foreign banks by defrauding the people and the public exchequer? No official figures are available. But in June this year the ASSOCHAM came out with an estimate which put the amount of black money abroad at $ 1.9 trillion or Rs 120 lakh crores. A mind-boggling figure indeed!

Assuming, for the sake of argument, that the names of the ‘patriotic’ Indians who have acquired and sent out so much of ill-gotten black money abroad cannot be revealed, nor the money brought back, the next question is: has the Modi Government taken any steps to prevent the ongoing generation of black money in the economy and reduce its greatly negative impact on the government’s revenue earning and conse-quently on development? Let us hear what economists have to say about it.

The burgeoning black economy, especially tax evasion, by reducing the buoyancy of the government’s tax and non-tax revenue . . . leads to a situation where the government’s revenue is less than that it could have been otherwise.
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A burgeoning black economy leads to widening of deficits through its effect on revenue buoyancy.

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The black economy affects not just the quantity of government expenditures but also its quality. Corruption reduces the effectiveness of these expenditures. First, the siphoning off of funds ensures that less amount of money is spent than what was originally budgeted. Second, use of sub-standard material to meet the target despite the reduced budget (thanks to corruption) brings down the quality of the assets created.1

Another eminent economist urges that it is imperative to face squarely the black phenomenon in all its aspects “by a series of well thought out and effective interventions”. (Does the Modi Government have any intention of making such interventions?) He then goes on to say that “the neo-liberal policies have given a boost to the black sphere of activities, imposing a huge cost on the nation”. How ‘huge’ is the cost?

A simple comparison of a widely quoted recent estimates of the ill-gotten ‘black’ money secretly taken out from India to various tax havens with an old time estimate (for the year 1964) . . . should suffice to show that the menace has grown to astronomical proportions and penetrated almost every sphere of our socio-economic life. According to the estimate of the Global Financial Integrity Institute, since independence the flight of black money or illegal income to various tax havens amounted to something like US $ 462 billion while the estimate by Anne Krueger for the rent generated in India was placed at Rs 201 billion, that is, about 7.1 per cent of the 1964 national income.2

It is not only important to bring back the ill-earned money smuggled out to the foreign ‘tax havens’, but it is equally important to stop the constant generation of black money within the system. But this is just not possible in a neo-liberal regime to which Narendra Modi is as much committed as his predecessor Manmohan Singh was.

References

1. “The Fiscal Situation 2010-11: Under the Lengthening Shadow of Black Economy”by Arun Kumar, Saumen Chattopadhyaya and A. Sunil Dharan, in Alternative Economic Survey, India, 2011, p. 89.

2. “Black Economy and Crony Capitalism: An Integral Part of the Neo-Liberal Growth”by Kamal Nayan Kabra, Alternative Economic Survey, 2011, pp. 164-65.

The author was a correspondent of The Hindu in Assam. He also worked in Patriot, Compass (Bengali), Mainstream. A veteran journalist, he comes from a Gandhian family and was intimately associated with the RCPI leader, Pannalal Das Gupta.