A democracy cess to fund elections? CII's dubious plan

It’s never a great idea to give government suggestions for new taxes. Ask Pranab-da, who wants to tax the daylights out of us with retrospective legislation going back all the way back to 1962. Or the victims: Vodafone, ONGC, Coal India.

The problem with government is it raises too much in tax, and blows it away in schemes that deliver the smallest bang for the buck.

The Confederation of Indian Industry (CII) will, thus, surely come to regret its suggestion to the government to impose a “democracy cess” of 0.2 percent on all income-tax payers – companies, individuals, traders, institutions, trusts – to fund elections and reduce the incentive for corruption.

We already have an education cess, a coal cess, a diesel cess, a crude oil cess, and various other cesses in states and Union territories – creating a virtual cesspool of taxation. For all that, we have lousy education, lousy roads, lousy energy supplies, and no commensurate results for the cesses collected.

 A democracy cess to fund elections? CIIs dubious plan

Given our corrupt system, why would individual taxpayers want to issue cheques to ungrateful political parties, when they can try and obtain direct benefits by bribing local or central politicians for their money? AFP

So why another “democracy cess”?

As the CII visualises it, “The democracy cess amount is to be paid by cheque directly by the income-tax (IT) payer to any one or more Election Commission-recognised political party of the IT payer's choice,” a report on electoral reforms said. If any taxpayer finds no party worthy of receiving his contribution, or has money left over from his 0.2 percent, it will land in the government’s coffers and also received a weighted tax deduction.

Given our corrupt system, why would individual taxpayers want to issue cheques to ungrateful political parties, when they can try and obtain direct benefits by bribing local or central politicians for their money?

Cesses are used to create a corpus for bankrolling a worthy cause. But making it compulsory for taxpayers to pay their tithes to political parties will not only make the idea difficult to implement – imagine millions of cheques coming from the country’s 16 million taxpayers to a handful of parties – but could even lead to increased corruption.

Since the cess cheques will reflect the size of your income, political parties will know who’s the rich one, who’s the poor sod, and use this info to their advantage. For example, a 0.2 percent cess on a salaried bakra earning Rs 3 lakh of taxable income will yield Rs 600 annually, while someone earning Rs 3 crore a year will end up paying Rs 60,000.

And since this information will be obvious to every politician worth his salt, he will easily figure out who he should blackmail for more money. So far from reducing electoral corruption, the CII scheme might end up stoking it.

In fact, if the idea is to ensure state funding of elections to bring transparency to the electoral process, here’s a simple remedy: transfer the funds now given to MPs for their local area development schemes (MPLADS), as this writer has suggested before.

MPLADS now has huge annual budgets of Rs 4,000-and-odd crore – which means Rs 20,000 crore in any five-year period between two general elections. This should be more than enough to fund elections both in centre and states.

MPLADS needs to be ended anyway for three reasons.

One, it is iniquitous, and can be used only by those who are elected MPs. This leaves the loser, who may have lost only by a whisker, fuming, since the Rs 5 crore money given to elected MPs can be used to endear themselves again to voters.

Two, with MPLADS money now being linked to NREGA schemes, the scheme will become even more unfair and loaded in favour of incumbents.

Three, since the scheme has a pro-incumbency bias, it increases the loser’s need for dubious money if he or she is ever to dream of being elected.

Abolishing MPLADS and distributing its booty equitably among all contestants in a certain proportion based on votes received will make electoral funding transparent and also more balanced.

Example: If A was elected with 100,000 votes, and B lost with a voteshare of 90,000 and C got less than 10 percent of the total vote, the funds should be distributed in the ratio of 10:9 in favour of winner and first loser, with those receiving less than 10 percent getting nothing. This will prevent frivolous candidates from entering the fray just to get funding.

In a three-way contest, where, say, the first, second and third contestants got 35 percent, 32, percent and 28 percent of the vote, this is the proportion in which the money should be awarded.

The only problem is this: no child is going to let go of his lollipop, and MPs will fight tooth and nail for this lolly to remain with them. But barring this political hurdle, there is no rational reason to inflict one more democracy cess on hapless taxpayers.

The fact is the MPLADS scheme is already one kind of democracy cess. And we are getting nothing for this misuse of taxpayer funds: neither probity nor clean elections.



Updated Date: Apr 18, 2012 14:17:39 IST