Budget 2015: Politicians' promise on black money half-hearted; no concrete steps likely

By Dinesh Unnikrishnan & Rajesh Pandathil

On Monday, President Pranab Mukherjee, during his speech at the start of the budget session, reiterated the NDA-government’s commitment to bringing back black money stashed abroad. The Narendra Modi government has taken several steps to ensure black money is brought back, he said.

The government has indeed taken steps towards the recovery of black money since it came to power in May 2014. This includes setting up of a special investigation team to track down the black money holders and putting pressure on international tax havens to share information on suspicious accounts.

The government has begun chasing the names in the HSBC list. According to reports, the income tax department plans to file at least 100 more complaints against the alleged tax evaders, while some 60 complaints have been filed already.

The government’s intent of recovering the unaccounted cash needs to be lauded, though one needs to wait and watch if the efforts indeed translate into actual results.

To be sure, the erstwhile UPA government too had made efforts to bring back black money when P Chidambaram was the finance minister, but without much success. Even this time, many see the fight against black money as a half-hearted one, arguing that the fight lacks credibility until the political parties comes clean of non-transparent political funding.

Call to political parties

“According to me black money in India is far more than what is stashed abroad… the large political parties in the country have to come together and say how they are planning to tackle black money,” said Lakshminarayanan, partner, Deloitte Haskins & Sells.

“Once that is done it is quiet likely that the other things will fall in place. But I don’t know whether this budget will contain anything to tackle black money. I don’t expect anything,” Narayan said.

There are others too, who doubt how effectively the government could win black money back into home soil, given that merely names in the list wouldn’t suffice to prove someone guilty. For that, the government needs to prove the charges of tax evasion by establishing the money trail.

Also, since the time gap between the HSBC list’s last entry (2006) and now, it is doubtful to what extent the unaccounted money is recoverable. This is something, even the special investigation team has acknowledged as a major hurdle.

Opaque political funding

But beyond the technicalities, the lack of transparency in the way political parties are funded, raises questions about the locus standi of a political outfit in the whole issue.

How committed can they be to the promise they make of pinning down the crooks? More importantly, how rightful it is for them to question the wrongdoers involving black money holders/ tax evaders?

“The first step to kill the blackmoney market is to make political funding in India transparent. When you promote black money, who would put faith in your fight against the same?,” asked a financial sector expert, who didn’t want to be named.

That is probably the situation most of our leading political parties find themselves in and the problem runs deeper and widespread. At present, majority of the funds that flows into the kitty of the political outfits come from unknown sources.

As Firstpost reported earlier, the latest report of the Association for Democratic Reforms (ADR) and National Election Watch for 2013-14 that analyses the details of political funding received by various political outfits, proves this.

At present, about 75 percent of the sources of funds to political parties remain unknown. This is in stark contrast to the situation in several countries such as Bhutan, Nepal, Germany, France, Italy, Brazil, Bulgaria, the US and Japan, where the complete details of the donors to political parties are publicly available.

Going by the report, the BJP hasn’t yet submitted its donations report to the election commission for 2013-14, while the Congress has not provided PAN details of donors, without which it would be difficult to link the donors against their donations and hence trace the money trail.

These words would sound similar to the ones often used in the black money probe, even though the stated donations of political parties are just a minuscule when compared to the circulated blackmoney numbers.

But more than the size of funds, perhaps, the practice should be questioned since it concerns public representatives.

Now, take a closer look. As per the 2013-14 report, the total amount of donations above Rs 20,000 declared by the national parties was Rs 76.93 crores, from 881 donations. The congress received Rs 59 crore, NCP Rs 14 crore, CPI about Rs 1.22 crore and CPM Rs 209 core.

Interestingly, the BSP declared that the party did not receive any donations at all above Rs 20,000 during 2013-14, as it has declared in the past. As mentioned earlier, the BJP hasn’t submitted the donation report.

To be sure, the ADR report for 2013-14 doesn’t give the total income details of political parties but just donations, which forms only a fraction of the total income. The remaining came from other channels such as sale of coupons and voluntary donations in the form of cash donations, where the identity of the donor is difficult to establish for taxmen.

But, according to its previous reports, the total income of national parties between 2004-05 and 2012-13 stood at Rs 5,890.66 crores. These numbers exclude funding of regional parties. These figures only include the declared income, which typically constitute less than a quarter of the total income of the outfit.

Of the total declared income of national political parties in 2013 (Rs 991 crore), declared donations formed only a fraction (10%) of the total income.

There is high probability that significant chunk of cash mobilised by Indian political parties for election funding and other expenditure are black money transactions that take place right under the nose of the government, central bank, taxmen and a myriad of investigative agencies.

A lot of cash donations received remain unaccounted for in the books of accounts as only those amounts would be recorded for which a receipt has been issued, warns the previous round of ADR report.

Given that unearthing black money is one of the major poll promises in Narendra Modi’s election agenda, he shouldn’t be silent about lack of transparency in political funding. Remember, Modi himself emerged victorious in the recent election riding a massively funded campaign.

But to be sure, there is no logic in questioning one politician alone as most of them are complicit. Their silence on lack of transparency in political funding is probably linked to the very question of their existence itself.

In 2012-13, the Congress declared the highest total income of Rs 425.69 crore, followed by the BJP with Rs 324.16 crore and the BSP with a declared total income of Rs 87.63 crore. The NCP had a total income of Rs 26.56 crore, CPI Rs. 1.07 crore and CPM Rs 126.09 crore.

In 2012-13, corporates topped the list of contributions with 72 percent to the national parties followed by individual donations with 17%. On the other hand, in 2013-14, corporate contribution to total donations rose to 90 percent of total, while those fro individuals stood at 10 percent.

In 2012-13, about 63 percent of donors to the national parties have not declared their PAN details in the contribution form. Interestingly, the BJP has listed the maximum number of donors, who have not declared their PAN details. How much money has changed hands from corporate and wealthy individuals to politicians?

In 2013-14, a total of Rs 6.66 crores was declared by INC, CPI and CPM as amounts received by cheque/DD without disclosing corresponding cheque/DD numbers, name of the bank/ branch on which the cheque was drawn, etc. which would aid in tracking the donations. These incomplete details account for 9% of the total donations received in cheque/DD/ fund transfer, ADR report said.

According to Section 29C of the Representation of People Act, 1951, the political parties have to submit their contribution details received in excess of Rs 20,000 from any person or a company to the Election Commission of India annually.

According to the ADR report, named contributions, i.e. single contributions above Rs 20,000, were found to be very few in number for all the parties when compared with their total income, raising serious questions about the source of the significant part of their funding.

The basic point here is that given the experience of rampant corruption across sectors involving politicians and corporations, the funds flowing into political coffers, every penny of it, by all political parties, should be brought under the right of public to scrutinise.

In the absence of this, it would be particularly difficult for the ruling government to convince the common man about its willingness to fight black money.

To begin with, the Modi government can set an example by making its own political funding details public. This would bring more credibility to its intent to fight the black money holders.