Wednesday, 14 December 2011

Eliminating Black Money in India

As the next issue of The International Indian is coming out soon, I take the liberty of putting here the entire text of my article on "Eliminating Black Money in India" which was published by TII in its last edition:


There are now at least three sets of proposals for dealing with corruption in India.

First, there is the government’s “weak Lok Pal” bill, which is considered by everyone (except the government) to be laughably inadequate.

Second, there is the Anna Hazare Team’s proposal for a “strong Lok Pal” bill, which would give unprecedented power to the new Lok Pal.

Finally, there is the proposal from the NCPRI (National Campaign for People’s Right to Information) – a body which has a much older and more established track record in fighting corruption and arbitrary use of power, for example through its demand for a Right to Information law in 1996. NCPRI has expressed “a great sense of disquiet” with the Hazare Team’s proposal, not only “because it does not address … arbitrary use of power (but) because it is unrealistic (to think that a Lok Pal) can alleviate “all ills”. Indeed a single strong Lok Pal (as proposed by the Hazare team) will “concentrate too much power in the institution, while the volume of work will make it difficult (for the Lok Pal) to carry out its tasks”. The view of the NCPRI is, therefore, that “there should be multiple institutions and … a basket of collective and concurrent (i.e. separate) anti-corruption and grievance redress measures”. (Please note that, in the quotes above, the materials in brackets are mine.)

If I was forced to choose between the three proposals above, my sympathies would be with the NCPRI’s proposals.

However, it is striking that there is one thing common between all three proposals mentioned above: the creation of a new institution in the body politic for addressing corruption in that body politic.

The problem is the following: as we Indians are not only corrupt, but have also mastered the various arts involved in corrupting others (especially those in any position of authority), how do we know that the Lok Pal will not be corrupted as well?

In fact, it is because the NCPRI proposals create a set of checks and balances that I favour them rather than the Hazare Team proposals.

However, the crucial fact that we must keep in mind to evaluate this matter properly is that the checks and balances set out in an extremely thoughtful way in our Constitution have not prevented the corruption of all areas of government - so far, less so in the case of the Supreme Court and the Office of the President of the country - but even these have not escaped entirely unscathed.

Therefore I want to put forward the question: is it not time to take an entirely different approach?

As background, let us keep in mind that corruption is about self-interest. By contrast, public office is about public service (usually for a relatively small monetary compensation). So public servants need to have an extremely high sense of morality, duty and public service if they are to offer genuine public service. No doubt, we have people with this sort of character but they seem to get systematically corrupted (or, if they refuse to conform, they become sidelined). That is why public service may be considered to have proven itself too weak to counter the self-interest of corruption. Which is why it may be time to consider whether the market (which is about self-interest) is not a better means, in our culture, for countering the self-interest of corruption.

Clearly, if black money, inside the country and outside, is anywhere near as massive as is being suggested, our current systems of public service are entirely unable to deal with the issue. What is needed is fresh thinking, from outside our current ways of organizing ourselves politically and legally.

Historically, in India, the overwhelming proportion of black money was generated and owned by business families. Now, a huge amount of black money appears to be also with politicians, bureaucrats, defense officials and perhaps even judges.

Justice has not merely to be done, but also to be seen to be done: as all our political, judicial, bureaucratic and business classes are under suspicion, rather than creating a Lok Pal, it may be better to create a National Clean Money Authority (NCMA) which is at arm’s length from all current police, army, navy, air force, and central as well as state investigation and prosecution agencies. The NCMA must be independent of political control so that the functioning of this agency cannot be stopped or interfered with by anyone in the country for any consideration.

Further, the Authority must be asked to do a very tiny number of things transparently under gaze of the public, TV, etc. That will be easy, as say three Members of the NCMA will be appointed by our country’s President from a global pool of people of high repute, and the Authority’s work will consist primarily of making the rules, advertising the tender, and then opening the bids for the work of the proposed 15 new Investigating Agencies. In time, the NCMA’s work and performance would have to be evaluated, and it would be best for the evaluation to be done by a Committee of Parliament, where the Terms of Reference would be simply that of evaluating how the NCMA had done its job.

Why should the NCMA not create just one Investigating Agency? Because, if only one Investigating Agency exists, it may be bribed or pressured relatively easily.

So why at least 15 Investigating Agencies? In order to ensure sufficient competition and prevent cartelisation: if more than a few Investigating Agencies need to be bribed for investigations to be stalled, the guilty will find it less than worthwhile to offer bribes.
The Investigating Agencies will not be paid a single paisa by the Government, rather they will bid for the contracts on a 3-yearly basis, with the highest bidders winning. However, any of the Agencies which successfully collects enough evidence to convict someone of having black money, will be given a specified proportion (I suggest 25%) of the black money in question, once a trial is successfully concluded.

Naturally, there is the key problem of how to eliminate delays in court. This is best done by establishing a new set of courts for the purpose, bound by the rule that there will be only one public hearing of each case, which will continue in unbroken session (allowing for working hours and holidays) till the trial has been concluded. Evidence selected by the Agency must be presented in one go, with a maximum of three working days for the submission of all the evidence and the arguing of the case. This will concentrate the minds of the prosecuting team, so that only the key matters are presented. Similarly, the defense will have two months to prepare its response, but it will also have a maximum of three days in which to present its defense. The Judge will then have two weeks in which to prepare the judgment. For those convicted, of however small an offence, there will be a compulsory period of five years in jail, which will be non-bailable, in addition to the financial penalty of losing 100% of the black money in question, along with a fine of 150%. This will probably mean lots of separate cases being filed by the Investigating Agencies in order to get quick convictions, but that is better than waiting years for Agencies to complete rather more thorough investigations - which may or may not ever be completed.

To be eligible to be one of 15 Agencies, candidate organisations MUST be publicly quoted companies, have global operations, and have headquarters outside India (but not in any of our neighbouring countries, where black money information could be used more easily for blackmail or terrorist purposes). For example, detective agencies, security companies, and accountancy firms (or some combination of these) could be candidates for appointment as Investigative Agencies, provided they have headquarters in a location that suggests sufficient distance and objectivity as well as the likelihood of probity.

As it may be too difficult for too many people in power if the Investigative Agencies were to trace and prosecute on the basis of black money in the past, there should be a “National Clean Money Day” (NCMD), announced say a year from the creation of the National Clean Money legislation. Up to that NCMD, everyone is free to declare their assets abroad or in the country. No tax needs to be paid on these assets and no prosecution will result. However, the Clean Money Laws (as proposed above) will apply from the NCMD.

No one, including the President of India, should be outside the reach of the Investigative Agencies. If any official or dignitary of the nation is convicted under the Clean Money Laws, that person will be considered to have been impeached from office, and a replacement would be sought according to existing or new arrangements in our Constitution, laws and regulations.

Versions of the above piece were declined by Civil Society, Economic Times, Hindustan Times, Indian Express, Mint, Tehelka, and The Hindu.

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