A nexus of business, bureaucracy and politics : The Tribune India

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Book Review: Thin Dividing Line by Paranjoy Guha Thakurta with Shinzani Jain.

A nexus of business, bureaucracy and politics

What distinguishes this book from several others on the subject of tax evasion and black money is that it combines an academic’s research with a journalist’s hard blows. Politically, it adopts a neutral stance, laying the blame where it is due.

A nexus of business, bureaucracy and politics

Unnoteworthy: The government’s disruptive initiative against black money, terror funding, counterfeit currency and demonetisation has been widely dubbed a failure Photo: PTI



Nirmal Sandhu

What distinguishes this book from several others on the subject of tax evasion and black money is that it combines an academic’s research with a journalist’s hard blows. Politically, it adopts a neutral stance, laying the blame where it is due.

Focusing on cross-border illicit financial flows, double-tax avoidance agreements, stock market scandals, open attempts to turn black money into white through the IPL and the failure of strategies to combat tax evasion, the book states its final conclusion unequivocally: “Without fail, each and every political personality of any significance in India speaks loudly about the need to contain black money but does little or nothing in practice”. 

The existence of black money means less revenue for the government, widening of inequalities in society and consequent social tensions, a higher burden on the honest taxpayer and an edge for corrupt businesses over those following the laws and rules. 

Riding on black money rhetoric, Narendra Modi grabbed power in 2014 and has since little evidence to back up his public claims. His major disruptive initiative against black money, terror funding and counterfeit currency, demonetisation, has been widely dubbed a failure.  

Even the BJP government’s intention became questionable when it did not make public the list of 628 names of tax evaders with accounts in HSBC despite a rap from the Supreme Court. After claiming that the disclosure of names would embarrass his political opponents in the Congress, Finance Minister Jaitley used the double-tax avoidance agreement with Germany as an excuse to protect the high-profile tax dodgers.

A former Chairman of the Central Board for Direct Taxes, R. Prasad, says that illegal funds taken out of the country find their way back into the Indian economy through FDI and fake exports. Incidentally, India’s FDI inflows rose 48 per cent between August 2014 and February 2016. The BJP leadership flaunts it as an achievement. 

The Modi government frowns on foreign funding of NGOs but not of political parties. On March 28, 2014, the Delhi High Court declared as illegal the funding of political parties by entities associated with foreign companies. The government amended the law (Foreign Contribution Regulation Act) in 2016 with retrospective effect to make such political funding legal, closing the door for any investigation into the BJP’s Modi-centric — and India’s most expensive — campaign in 2014, costing, according to one estimate, Rs 714 crore.

The book blames the nexus of business, bureaucracy, politics and crime for the running of a black or parallel economy. They are all in it together. A large number of political parties have been floated for laundering black money. Political parties are exempt from income tax payments and their accounts are managed by “friendly” audits. The Election Commission has no power to deregister any rogue political party. 

Making elections transparent remains a challenge. A feeble attempt was made by Jaitley in February 2017 through the introduction of electoral bonds. Since the identity of companies and the amount of donations made are to be kept secret, the move will have the opposite effect.

Given the use of tax machinery to spare BJP’s “friends” and target “enemies”, inaction on the Panama Papers and lack of any substantive outcome from the proceedings of the Supreme Court-monitored SIT, it can be safely concluded that, regardless of political buster, the menace of tax evasion and black money is here to stay. 

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