Currency shock, second part

Facebook and Twitter are apparently flooded with comments on the current anti-black money drive, some supporting it as blindly and vociferously as others are opposing it tooth and nail, but, though the blog counter keeps climbing as always, I have got only three people to write in rejoinders as yet! And I thought I was writing about something that touches everybody’s lives. Goes to show how painful most people find it to think and speak/write rationally and civilly, as opposed to screaming mindlessly…

There are two things that I want to add to what I have already written. Though the PM keeps murmuring ad nauseam that ‘ordinary and poor men’ are not being hurt, it’s only the dirty rich who are suffering, the mass media are either totally blind or else it must be accepted for a fact that no rich man has had reason to feel harassed. Tell me, how many tycoons, filmstars and cricket stars have you seen standing in queues before ATMs trying to withdraw a paltry few thousands over the last week, either with your own eyes or in the papers, the net or TV? What can you do with people who can stand under the blazing sun and chortle ‘What a lovely moonlit night!’? And what is all this about catching people with black money anyway?

Economic pundits differ greatly about the definition of black money – ask Google about it. But in order even to start finding and destroying or mopping up black money on a significant scale, the government must first decide on a working definition – and preferably get the permission of Parliament and the Supreme Court. They have never insisted that everybody who has an income must file a tax return every year throughout his working life. As things stand, only 3 per cent (or is it just one?) of the country’s population pays income tax, and they consist largely of salaried folks in the organized sector, besides a few corporate businessmen. I remember that back in 1991 I heard for the first time that we schoolteachers who also have ‘other sources’ of income must hereafter file returns on their own; their employers keeping tabs on their behalf and deducting tax at source would no longer be enough. I cannot speak for anybody else, but I have been filing returns, and paying taxes, ever since then: the practice remains unbroken though I have been self-employed for nearly fifteen years now.

But I know for a fact that a majority – maybe it’s the vast majority – of small and medium income earners in this country have never filed returns (I can personally think of lots of grocers and mishtiwallahs and small building- or labour-contractors and even doctors and teachers, especially in rural and semi-urban areas). If all income that is not declared to the tax authorities is black money, then most people, or at least a majority of them, deal in black all the time, all the money they have is ‘black’, though for a lot of them it might mean only a few tens of thousands a month! My driver in the early 2000s actually exclaimed ‘Why should you pay income tax? Isn’t it only film actors who do that?’ and I have satisfied myself that that is the attitude of a great many ordinary people. Besides, in how many places do you shop where they give you regular receipts as a rule?

So unless your real purpose is to harass a lot of perfectly ordinary and non-criminal people (and maybe shoot yourself in the foot by bringing economic growth to a grinding halt), you should first – and gradually – make arrangements so that every single income earner is persuaded to file returns. That, and not sudden demonetization, was the right way to begin. Do you have any idea how long that will take, and how difficult it is going to be? Imagine even explaining to a cattle-dealer in some remote village in Chattisgarh why he must file income tax returns, and how! And is the IT department ready to handle a sudden tenfold increase in the number of files it is called to deal with?

Next, if you really want to get the majority of people into the white economy, you must persuade them that paying taxes is good for them, not only because it is easy and not too heavy a burden, but they are helping the nation to progress in ways that they can see and benefit from. Any government which is visibly working hard to deliver basic everyday essentials – water, sanitation and sewerage, roads, lights, houses, schools and medical care – finds it much easier to do that than one which merely spends millions on advertizing that happy days are just round the corner. Likewise, any government which keeps taxes light finds it easier to collect. Under India’s tax regime, you are punished if you declare income honestly: that needs to change, and at once. If I had my way, income up to Rs. 50,000 a month in cities for self-employed people with families should be tax free, income upto a lakh a month should be liable to just 5% tax, upto three lakhs a month, 10% and so on. If a 30% tax rate is to be applied at all, let that fall only upon those who earn more than a crore a year. Isn’t that much fairer for all concerned? If such a system is applied sternly without fear or favour, it is virtually certain that overall tax collections are going to swell enormously. Does the government want that, or not?

Whereas it seems to me that the entire target seems to be the middle class (by which I mean all those whose family incomes are between one and twenty lakhs a month). It looks as if creating a big sensation by harassing them was the real purpose – heaven knows why. Look at this declaration of the government that those who are depositing upto Rs. 250,000 at a time in old big notes with the banks will not be ‘scrutinized’ by the taxmen. How ridiculous! Consider a man who has declared an income of Rs. 40 lakhs: he obviously must keep depositing more than that paltry amount many times a year, mustn’t he? So the above-mentioned warning means that even if all his money is white, hard-earned money, he may be bothered by tax officials if he deposits more than Rs. 2.5 lakhs in November and December this year. Is that a way to draw out black money, or one designed to drive even more people under the scanner?

And meanwhile there are tycoons who are merrily marrying off their children with lavish do-s costing tens, even hundreds of crores, apparently cocking a snook at all the powers that be. Am I to assume that in a country where a person who earns more than ten lakhs a year is officially considered ‘rich’, such people have ‘earned’ those zillions honestly, declared them in full to the tax authorities, and are now spending it all in white? Here’s a thought: why didn’t the government first go for all those who have bought Rs. 50-lakh-plus cars and Rs. 5 crore-plus penthouses and gone holidaying to seven-star resorts within the last ten years? And why not after the temples which routinely take in crores of rupees every day from devotees, and are well known to have stashes of cash and gold to the tune of tens, even hundreds of lakh crore rupees? Something is rotten in the state of India, and even more so with those few thousand zealots around the country who are praising the government to high heavens on the social media for seriously going after the seriously rich … to be blind is bad, to be blind and stupid is worse, but to be blind, stupid and bloody-minded really takes the cake.

P.S., Nov. 21: I should like to leave a link here to this open letter signed by a number of eminent citizens, dated Nov. 16, and to this editorial in my newspaper today, because they broadly share my standpoint. If and when this whole exercise turns out to be a damp squib achieved at enormous national cost, and the government has a lot of egg on the face, my readers should remember that I told them so. If it turns out the other way, I shall certainly praise this government fulsomely.

P.P.S., Nov. 26: Just to put things on record, for my own future reference if nothing else: Dr. Manmohan Singh has called the process a 'monumental management failure' and 'a case of organised loot and legalized plunder'; Amartya Sen has said 'at one stroke it has declared all Indians, indeed all holders of Indian currency, as possibly crooks, unless they can establish they are not', and that 'only an authoritarian government can calmly cause such misery to the people', while Mamata Banerjee has, quite rightly, I believe, taken strong objection to the PM posing as the only saint in the country, and calling everybody who does not agree with him a crook. I shall be very curious to know where the BJP itself got the money to fight and win the last Lok Sabha elections, and how much of it was white.