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Association of Retired Senior IPS Officers (ARSIPSO)

This is with reference to my letter No. ARSIPSO/GS-BSD-4/2023 dated. 10/08/2023 on the 4th B.S. Das Memorial Lecture, which had to be rescheduled for unavoidable reasons.

The 4th B.S.Das Memorial Lecture to be delivered by Shri Anil Kumar Sinha, IAS (Retd.), on the subject Disaster Management: Creating Safer Communities, has now been rescheduled for October 14, 2023 as per the following:

Conference Room No. 2, India International Centre, Max Mueller Marg, New Delhi, October 14, 2023 (Saturday)

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Tax Collection -a key to effective fight against Corruption - B R LALL


Over 70 % population of India is below the poverty line with a per capita income of $ 2 per day. These masses represent the category of ‘Common Man’. They suffer from acute poverty and deprivation, do not get proper two square meals, do not have access to essential services like health, education, shelter treated drinking water. I will define these as the common people. The common man is basically poor and weak.

This common man is exploited on all the fronts. The laws provide certain safeguards and privileges to him, but the powerful people misappropriate the privileges and bend the laws to use them for the exploitation of the commoners in all the fields – economic, social, political and administrative. Long back the Rig-Veda recognized the importance of law and the protection they can afford to the common man:

Law is The King of Kings
far more powerful Than they;
By whose aid even the weak
may prevail over the strong.
                                                         - Rig Veda

The above dictat is clear that the law can be a very powerful tool in the noble service of the masses, but it is silent if the law is not allowed to prevail. We see day in and day out that the laws are bent or cast aside and the machinery of law (read government) is used for repression, suppression and exploitation of the common people. Such misuse of law in various fields is a vast subject by itself and cannot be taken up as a whole at this platform. I propose to deal with only the financial aspects that too particularly as related to non-payment (evasion) of taxes that are due .The other aspect is not to pay the due compensation to the week for his services. I propose to concentrate on the single aspect of tax evasion in the limited time that I have.

The dire consequences of this evasion can properly be appreciated only in the light of the role of looking after the welfare of its people the modern state has taken on itself. Since the majority in India falls in the category of common man, the State is thus wedded to his welfare. It has to maintain peace and justice so as to ensure that everybody can follow his vocation unhindered. It has to ensure that the common man is not exploited and that he gets at least the minimum requisite level all the essential services and of course an honorable source of livelihood. In most of the advanced countries of the world if they cannot provide employment to a person for any considerable time then subsidies and doles are given to the unemployed for their honourable survival as a matter of right for which the common man is not beholden to anyone as the state is only discharging its responsibility.

The tax evasion makes good governance impossible as it takes away economic power from the Government, creates black money, leads to mal-distribution of the national cake, concentrates economic power in a few who are often undesirable persons, cuts down the course of productive stream and hence the employment. The reduction in the resources at the command of the state deprives it from the wherewithal to perform its essential functions and also creates social unrest. This evasion of taxes ultimately culminates into Financial Terrorism that is the root cause of physical terrorism and all other forms of terrorism except of course the religious terrorism that falls in a separate class altogether, which I do not propose to touch.

As per the World Bank, the essential services in India that make the life worth living are very poor, as the government does not have money for any of these services. Nature did not create us poor. The country has crores of super rich people. Even when the world was passing through the recent depression, in India the common man might have been on the road, but there was no let up in the enjoyment of the big in India. Their acquisition of luxury cars or business trips abroad continued and rather increased as they had more leisure available. They have enough money stacked in black. There is a single reason responsible for all this disorder that the due taxes are not collected in India. With comparable or even the lower rates, the advanced countries collect 25% of the GDP as Union taxes and the world average is 22%, but for India it is only 9%, that too of the recorded GDP only. The hidden GDP is believed to be equal to the recorded GDP. That may push our collections down to as low as 4.5% only or say just the 1/5th of what should actually be due.

The mafias grow and thrive at the head of this mass scale evasion of taxes as the black incomes are accumulated and the Mafias, dacoits, the kidnappers and all such denominations eye these unearned incomes with greed. Since basically it is a fraud on the public money or the exchequer that belongs to all, they also like to have a share in the loot. It is for this reason that the big mafia is concentrated in Mumbai, as it is the hub of mass evasion of taxes like customs, excise, corporation and income.

Unfortunately in our country, no effective steps have ever been taken against this worst category of criminal. He is an offender in the eyes of law as he violates the Tax Laws of the land and deserves to be punished. After all every type of criminal commit crimes only to misappropriate more money. What then is the difference between a Supari killer and a tax evader, as objective of both is the same, only their techniques differ. The effects of their actions on the society are also the same, but still one is condemned whereas the other has gained respectability. It is the manifestation of the graded elitist society as the physical terrorist starts as a helpless common man, but the financial terrorist is the big person. It is a different matter that after amassing money this common man turned mafia also follows the ways of the other cousin and tries to gain respectability.

In dealing with the tax evaders, the governments have been very soft and rather apologetic. The laws have never been enforced on him strictly and with seriousness. I have not known any one being jailed for evading taxes. I wonder if at all there is such a provision in our legal system. On the other hand from time to time schemes of general amnesty on tax front are brought into operation and for a peanut the entire black money gets converted diluting their sins of ages. It has to be realized that the tax evader is also a criminal like any other and should be treated, punished and also sent to jail like them, then only the taxes will be paid. It is the soft state that abets this crime and it is the strong enforcement of laws that can check it.

The institution of CVC can play a very positive and a crucial role in this context. One of the most important functions of any anti-corruption organisation is to prevent corruption. All the countries that mean business and have come high on the index of the Transparency International, have a very powerful ‘Corruption Prevention Wing’ and another ‘The Education Wing’. The former keeps on studying the routines and the procedures of the departments and keeps on advising them, whereas the latter educates the people on all the matters related to this malady and the fight against it. The latter builds resistance in the society that is so essential for undertaking any effective fight. It has been observed the world over that tightening and amending the procedures extended very salutary help in containing corruption i.e. preventing its occurrence. In Hong Kong the ICAC, the counterpart of our CVC and CBI combined studied and achieved tremendous success. Amongst others, it even streamlined the procedures adopted in graveyards and with spectacular results. Since CVC and CBI are designed to work in tandem, a separate wing for the purpose can be created in either of the two. The wing should be very strong and adequately staffed with specialists from a number of disciplines. That of course is the domain of details that can be worked out, once the decision is taken in principle. Tax collection is sure to soar high with this one step.

In India neither the CVC nor the CBI has either the Corruption Prevention or the Education wing. CVC has made some embryonic efforts at prevention, but it does not serve the intended purpose unless a consistent dose is administered or some imaginative measures are employed to inculcate sense of shame or fear .The trade ,the industry as also the staff in Government, all require education and need to be brought face to face .Face to face analysis and promises that could be extracted would amount to a sort of Integrity Pact.The wing apart from imparting moral and ethical education to the various groups enumerated above ,could also formulate codes of conduct. The training courses could be so designed as to instill positive values like honesty, through appropriate techniques for various groups.

However, most of the grown up people, by and large, will only ridicule the lessons in morality, but still they have to be tackled. The education wing as such should basically concentrate on the young ,right from the primary school level with all the earnestness. Young people imbibe these values easily, as against the tremendous resistance in the greedy grown up people. The beginning could be made from the Kindergarten (with cartoon booklets and activity sets) and should travel with them right upto the university or the higher educational institutions, with suitable changes in the programmes at every successive stage. Right from school days they should be made aware about ill effects of corruption. Young children take the teaching in the school as gospel’s truth. They will not only imbibe the value system themselves, but would also act as teachers and policemen for the parents erring on scales of morality and the law. As they progress in their studies i.e. graduate to higher classes, constant dinning of morality, ethics, legal provisions, nationalism, expectations from them will be required to be dinned into their ears. All such efforts produce results in the long term only as education produces slow results initially, but is an extremely potent weapon in the long run.

The business schools also need be targeted. Education on business ethics should be imparted to them. This has become more relevant as we have embarked on the system of privatisation or liberlisation.

There is another aspect of this crime that the booty is partly sent abroad into the secret foreign bank accounts. Indians are supposed to hold enormous funds in such accounts.A visiting Director of Swiss-banking system had declared in 1996 that Indians held $2550 bn. in deposits in Swiss banks. Drain from this country is continuous and ever-rising .One can conveniently guess without any risk of going wrong that the present holdings must have doubled at least to say $5000 bn. or $ 5 trillions. (Rs. 2.25 lac Arab) equivalent to 40 times the annual budget of the Union Government for 2005-06. But these holdings abroad cannot be checked as banks cover themselves with the veil of secrecy. However the slush arising out of the drug trade is being treated differently. If it is suspected that money in a bank has some relation with drug trade, the secrecy laws stand automatically relaxed, as these have been amended to that extent, at the instance of the big western powers, as drugs are their problem. After attack on World Trade Centre in New York on 11th September 2001, the potential of this menace was realized by the advanced countries and the money held in various accounts by terrorists has also been frozen. For countries like India, all economic offenders including the corrupt are the Financial Terrorists. Major problem of the 3rd world is the tax evasion and the corruption causing great drain on their economies. This drain will continue unabated unless there are certain structural changes amending the secrecy laws that are aiding and abetting this crime. It would not be an exaggeration to say that the people of the countries like Switzerland engaged in secret Banking are leading parasitic and criminal existence. This hypocrisy does not go well with their famed high stance on morality. They should abandon such laws and throw their banking business open and transparent. Since these financial crimes are against humanity and Bank Secrecy provides the basic infrastructure to facilitate and make it possible to hide the assets, the Secrecy laws should not find place on statue books of any civilized country in this shrinking world where interdependence of countries is growing higher.

This forum should address itself to this and such like related basic issues in details as we are one of the worst affected countries of the world in this regard. We should take up this question forcefully, rather at the crusade level in the conferences as also with the Swiss bank authorities, the developed world and with all possible Organisations, Forums and NGO`s at the international level. We should create a lobby of the countries of the 3rd world, to exhort the OECD who is always ready to uphold morality all over the world, and should agitate for relaxation of banking secrecy laws. Following measures are relevant and an immediate necessity in the Indian context and the same holds good for all other countries similarly placed.

a) Whenever a bank account is opened by an Indian citizen abroad, the particulars of such Indian and such account should be communicated to the Indian authorities, through its embassy/high commission in that country. Such account numbers and other details should be compiled in the CBI.

b) If the person is found involved in some crime, particularly of corruption or any other white-collar crime that has been registered against him in India, then the particulars of balances in his accounts and the copies of such accounts, if asked for authentically by an investigating agency, should be supplied by the country in which such accounts or the assets are held. A nodal agency could be authorized in this context, say CBI in case of India. If any State /Union agency needs some information, it could approach the CBI. The foreign bank/government should have no discretion but to supply duly certified copies of accounts/information whenever demanded by the nodal agency,

c) Whenever an Indian purchases property abroad, its details like those of bank accounts, be informed by the registering authority there, to the Indian Embassy/ High Commission, who will transmit the same to India. This information could also be compiled in the CBI and used at the time of need.

d) To make a beginning, details of all properties and bank deposits held abroad by the Indian citizens at present be supplied to Indian Embassies/High Commissions in the respective countries.

e) Further, on instructions from CBI, the accounts be frozen, the lockers, the properties and other assets sealed and their transfer or sale be banned. Ultimately the accounts and assets be treated and disposed as per directions of the Indian courts.

f) For obtaining/supplying such information, the doctrine of dual criminality should not be insisted upon, as the core contents of such crimes are similar everywhere, only some technical details may differ. Similarly blanket sovereign guarantee of reciprocity may be executed, once for all at the level of the governments so far as such crimes are concerned, and should not be insisted upon for every individual case as that causes tremendous delays.

Once this happens, hiding black moneys/assets abroad will become very difficult and practically impossible. This country, as also whole of the third world, will start looking up immediately. But to get such amendments to their rules, India has to take other countries of the 3rd world along, and initiate very persuasive and aggressive propaganda underscoring the point that we are readily helping them in their fight against drug and terrorism and that they also need to reciprocate. It will be a time consuming process, but requires sustained efforts, so that the countries like Switzerland are persuaded or even coerced at the international level to be transparent and to abandon the diabolical secrecy laws leading to and protecting this gravest crime against the humanity.

It will not be easy, as the Indians holding such accounts/assets abroad will surely oppose any such moves. But no meaningful service to the common man can really be successful without such radical measures.

Imagine the Scenario that if tax revenue of the Union were to rise five times from the present Rs.3.70 to Rs.18 lac crores that is due or even to half of it per year, the government will have enough money to construct roads, to provide water, education, sanitation, health and all the other services and would also be able to pay to its employees a better wage so that at least some of them could be weaned away from the lure of corruption.

Much talk of good governance goes round with various suggestions as to what should be done and what should not be done. The States keep on alternating between the Peter and the Paul as it cannot have enough resources for all. With present level of collection of taxes, it can do no better. If the nation could concentrate on this one point programme of collection of taxes, that by itself will go all the way to ensure good governance.

The author is a retired IPS officer and former Director General Police Haryana .

The views and facts stated above are entirely the responsibility of the author and do not reflect the views of this Association in any manner.

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