At the time that he presented the budget, the
Finance Minister had promised a white paper on black money. He presented
the paper in the recently concluded budget session, one of the few
promises he has managed to keep. The paper was welcomed or criticised by
members of parliament depending upon which side of the political divide
they belonged to. I was amused by the title of the paper. As one
matures one realises that there is nothing spotlessly white or totally
black in life and there are only shades of grey. There was a great
temptation to comment on or analyse the white paper, but then I realised
that such an analysis, in the limited length of an editorial could have
been described by the same dress that the former finance minister used
to describe the white paper. I therefore decided to restrict myself to a
few observations and share my thoughts on a related topic.
The
paper describes money as white or black. Whatever the colour most of us
strive to possess it. Whether one likes it or not it is the driving
force, for individuals, families, and yes, nations as well. Recently I
read a book titled the “Ascent of money” by Niall Ferguson, British
historian. The book traces the financial history of the world. Money in
the form of currency as we know today is a creation not more than few
centuries old, but since its discovery it has pervaded human life. The
standard definition of money is that it is a medium of exchange. To
function optimally it has to be durable, fungible, portable and
reliable. Modern day money whether it is paper, plastic or electronic
has all these attributes except the last one; reliability. The book
quotes with approval Jacob Bronowoski who said that the ascent of money
has been essential to the ascent of man. Many would dispute the
correctness of that statement.
The singularly distinctive
quality of modern day money is its ability to be stored for any length
of time for future use and consumption. This may be the cause or at
least the catalyst for some of the problems that the world faces today.
To illustrate, in 2007, the year in which one of the worst financial
crisis that continues to plague the world commenced, the CEO of Goldman
Sachs received$ 73.7 million as remuneration. In the same year George
Soros, the veteran speculator made $ 2.9 billion. All this at a time
when more than 1 billion people around the world earned less than $ 1 a
day. In this scenario, is the development of money synonymous with the
development of the human race? It is a question that is difficult to
answer since financial scams and scandals occur frequently enough to
make money appear to be a cause of poverty rather than prosperity.
We
strive to give our next generation good health, the best education and
enhanced security. None of this can be bought with money. We teach our
children, ethics, morality and the innumerable sterling qualities that a
human being must possess but when the child steps out into the world
the singularly significant assessment parameter is the money he makes,
the money he would leave for his future generations. We make a
distinction between what we practice and what we preach and seek to
justify the same. We as professionals tell our students that there is a
great difference between theory and practice. There certainly is but
should that difference be as wide as white and black? While accepting
the exalted status that money has we must be conscious and make our
future generations aware of its most serious limitation that it is only a
medium. When society evaluates the financial health of a person, the
questions to be asked are “how” he earned money and thereafter “how
much”? The order should not be reversed.
Before readers mistake
this editorial for a philosophical discourse, let me make a few
observations on the white paper. The paper states that black money is
the result of two categories of activities. The first category is that
of crime, drug trade, terrorism and corruption. In the second category
which according to the paper is the more likely reason of generation of
black money is the intent to defraud the public exchequer. It is
difficult to agree to this categorisation. Undoubtedly hard core crime,
drug money and terrorism are social and political problems which give
rise to unaccounted money; they can be controlled or contained by an
intolerant attitude of the state and participation of all its
enforcement agencies. Corruption must fall into a different category.
The
real problem is the second category. We must decide whether we want to
equate avoidance with evasion. Those who avoid taxes remaining within
the corners of law cannot be treated as generators of black money. In a
majority of the cases it is post compliance harassment that forces
people to side step regulation. Archaic, multiple laws and regulation,
coupled with uncontrolled discretion and lack of accountability on the
part of the bureaucrats and politicians leads to corruption. There is
thus a vicious circle of evasion of statutory obligations, and enjoyment
of the largesses under the benevolent eye of the corrupt authorities.
In the first category, the “black” money generated by crime is
distributed, however inequitable the distribution. In the second the
proceeds of evasion of statutory dues and particularly corruption are
siphoned off. Often they are then laundered with the blessings of the
corrupt authorities.
In the first category the money generated,
will give rise to violence and will maim citizens and the country but
the second is like a deadly cancer that will cause total decay of the
moral fabric.
The white paper discusses various methods by which
to curb the menace of unaccounted money. In this regard the government
must consider three requirements essential to ensure success in its
endeavour. Firstly there must be total transparency in regard to
thinking of the government. If the authorities consider certain action
of business or industry as contrary to legislative intent it must make
this fact known expeditiously. Secondly it needs to integrate inter
agency and intra agency databases, before increasing reporting
requirements an aspect that the white paper recognises, but one hopes
there will be follow up action. Thirdly before introducing a measure
like NOC for real estate transactions which the white paper
contemplates, past experience must be analysed otherwise the measure
will have limited effect.
We need fair, simple laws fairly and
humanly administered. What worries the nation is not the fiscal deficit,
because that will hopefully be corrected, but the trust deficit. When a
representative of the government stands on the floor of the house and
makes a statement it should be treated with the sanctity that it
deserves. We all know that today “black” money dominates our economy.
The endeavour must be to see that the generation of black money reduces.
Along with deterrent punishment for violators there should be an
incentive for compliance. In any economy compartmentalisation of “black”
and “white” money is virtually impossible. It is also irrational to
believe that black money will disappear from the landscape. The attempt
must be to gradually change the proportion. The proportion is such that
today the economy is a chequered one. The proportion of black should
reduce so much that it becomes an adorable beauty spot on flawless
beauty!
