Blackmail over Black Money

Are the dire warnings by the Modi Government against defaulters intended to scare off a large amount of black money from being brought back into the system? This money could have been used in nation building and help the poor, but the BJP government seems intent on keeping this vast sum out of the nations's coffers with its scaremongering. What could be the reason for this?

Narendra Modi has declared war on black money and its hoarders. But the way he has threatened and shamed the so-called holders of black money has had the opposite effect on the one he may have intended. While he had hoped for a smooth transition, with the masses lauding his move and waiting patiently in line to change their limited cash, and black money owners quietly shredding their cash or willing to take the risk of confiscation while depositing large sums in the bank, he has only managed to create an atmosphere of fear and anxiety. People have rushed to jewellers or money agents to exchange their old notes for a fee, and those who do not have access to such routes have decided to stand in queues at banks all day, every day, along with their family members, to exchange all their savings for cash within these fifty days instead of depositing any money in their accounts, not only because of their innate suspicion of banks and fear of the taxman, but also due to shame that they may also tarred with the same brush of beimaan, kala dhandeywale, that Modi has declared open war against.

It is my humble submission that it is this atmosphere of fear created by Modi's hard hitting declarations and threats made by many in his government as well as the BJP against black money holders which is responsible for the chaos we see on the streets today. They have set a ceiling of Rs 2.5 lakh as the legitimate deposit which would not be taxed or viewed with suspicion. Anything above this, they imply, is open to query, confiscation or prosecution, unless a proper explanation can be given for the source of the income. Now even those with less than Rs 2 lakh are afraid to do so in a single account for fear of being queried, as they have no way to explain why they had not deposited this income earlier or declared it to the taxman. A thelawala who sells chowmein begged me to keep the Rs 50000 he had saved on his behalf. Not only did he not have a bank account but was also afraid he may not be able to withdraw the money in the near future even if he was now able to open an account. My driver's wife, who sells momos, had saved a some lakhs and had hidden it with great difficulty from her husband who could snatch the money if he ever came to know of it, and is at her wits end to know what to do as she is not aware of the rules about paying tax on anything higher than 2.5 lakh.

As a responsible leader, shouldn't Modi have been shouting from the rooftops for all people from all strata of society to come and deposit and declare their money without fear, that all were part of the government's great mission to cleanse the society of the perils of black money? Instead of dire threats and predictions to shame and destroy those who had large sums of unaccounted for money, forcing them to destroy it or funnel into illegal channels, shouldn't the government have accepted each and every rupee that came its way, only adding in a quiet aside that penalties would have to be paid by those who were unable to give an explanation for their deposits? Why would you even specify that one would have to pay 30 percent tax, and then 200 percent penalties, and may also face confiscation of the entire amount as well as prosecution in the very beginning? All this could have well been declared after the drive was over and in a civilised manner.

Why would the income tax authorities choose to conduct raids at this very critical time across the nation, leading to panicky businesspeople and entire markets shutting shop? Why would you warn jewellers not to accept the old cash but then say they would have to provide pan cards for their transactions? Police have also jumped onto the bandwagon and are confiscating money anywhere they can find it. A doctor was caught with Rs 35 lakhs with which he claims he wanted to buy some hospital equipment. Is this why private hospitals are afraid to accept cash, as they fear being hounded for holding large sums of cash, especially as there was also a ban on using the old currency in private hospitals initially? A teacher in a coaching class may have lakhs in cash. Should he have kept a credit card machine or asked his students to pay only by cheque? A group of employees was caught with 98 lakhs in cash, which they say their owner has asked them to transport by train to Surat, to pay suppliers, as he was a textile merchant. We know how busy black money exchangers are in Surat these days, as they are in many other parts of Gujarat and India, but can the police really decide if their story is genuine or not. If the money is not returned within these 50 days, is it not an injustice? Will the courts be able to deliver a verdict on this in fifty days? The Supreme Court, which likes to pontificate on all measures taken by the government, is strangely silent, perhaps because it does not want to open its own can of worms on this issue.

Which responsible government in the world would bang the drum of retribution so hard so as to purposefully drive away any or all who had finally decided to give up their fight against the system and deliver their precious fortunes into the lap of the taxman? Which leader of a free country would make jokes in all his public speeches that people were burning money by the sackfuls or throwing them into rivers? Should he not have sternly warned instead that this was unlawful? Could he not have humbly begged them to hand over all the money for the betterment of the nation instead, and for performing this service, the government would try to deal with them in a humane and sympathetic manner?

But therein lies the crunch. If the banks do not receive the one lakh crore rupees of black money that is estimated will be squeezed out of the system in this drive, it is no skin off Modi's nose. He can recover this money from the RBI. This money that may not re-enter the banking system will be shown as windfall gain in the RBI's books and its liabilities to the unreported amount will be wiped out at the end of the year. RBI can simply hand over this money to the government as dividend, and the government can triumphantly show the country that this large sum, which will boost its non-tax revenues, was the amount of black money corrupt people were holding and forced to destroy and so it has been enormously successful in its mission and has kept its promise to the people. It can earn a lot of cheap brownie points this way or even win an election or two.

But if it actually recovers the entire sum of 14 lakh crore circulating as 1000 and 500 rupee notes it might mean a public backlash. People will ask if a lot of this money was really from black money hoarders who were afraid to declare it earlier. Why would they deposit it now when the penalties are ten times greater? Also, black money channelled back through banking deposits will mean severe headaches, as each deposit will have to be studied and then queried by the taxman, and if confiscated, may result in litigation. If prosecution is initiated, the cases will drag on for years, as it will be very hard to prove which part of the deposit is white and which black, and the amount will remain unresolved on the books.

Let me be even bolder as to ask, was this a veiled warning by Modi to many industrialists and political party honchos, both in his own party and to leaders in the opposition, that they should get rid of their money any which they could, as he simply did not want to bear the responsibility of prosecuting established businessmen and political heavyweights for their ill-gotten gains, but would be duty-bound to do so or face accusations from the Aam Aadmi of cronyism or worse? Though it may help Modi's popularity graph in the near term that he has finally laid to rest the bugbear of corruption, it may have many unforeseen consequences far into the future, in particular on the unorganised sector. India has been known as a nation of savers, but this thrifty populace may start indulging in mindless consumption, finally ending in debt like many in the USA so that they don't have to give away part of their hard-earned money to the taxman.

Everyone, from the ordinary housewife, the paanwala or thelawala selling street food, the small shopkeeper, trader or businessman in the unorganised sector, to restaurateurs, doctors, lawyers, engineers, professors, bureaucrats, policemen, the farmers and moneylenders and even daily labourers in the rural sector, not to mention local politicians and civic officials who all have hoarded 'black money' to a greater or lesser extent, are now afraid of being seen as criminals by the Modi Government. When Modi came to power and promised to wage war against black money, he was lauded by cheering crowds comprising these very same people. They thought Modi would go after the big fish, the corporate honchos who fudged their accounts, the industrialists who had taken large loans from the banks and later defaulted, the rich businessmen and real estate tycoons who did not pay more than a fraction of their taxes, those who had siphoned crores into accounts abroad, or into real estate and gold. Never in their wildest dreams did they imagine that they, too, would become the targets, and their hard earned savings or the extra incentives would also enter into the tax dragnet.

Could this have been the actual intention of Modi's demonetisation drive? Counterfeit money in circulation is reportedly only 0.025 percent of the entire 14 lakh crore of Rs 500 and Rs 1000 notes in circulation. The amount of black money held by big fish could at best be 10 percent of this amount but is probably much less. It is the remainder of the money held in cash, mostly in the unorganised sector that may have been the target of the Modi government. But could any government, even at the height of its popularity, dare to announce that each and every citizen must become party to this drive and declare all their savings and perhaps even give up part of it as tax, for this effort to be truly successful. In the days to come, as the fifty day deadline approaches, and many are unable to transfer their cash into other holdings since they don't have accounts and realize that their savings may also be taxed if they bank it, and if they are still unwilling to declare it, then it is no longer worth the paper it is printed on, will the true public disenchantment against this black money drive become apparent. When it pinches your own pocket and you realise that you too, in a small way, took advantage of the same system that was being utilised by black money generators, will all your ideals go out of the window and self-preservation become paramount. Today, Modi is being hailed as a saviour. Tomorrow he may be cursed as a destroyer. Public memory is short, and the worm can turn at a moment's notice.

Tomorrow, these very people will ask how hawala dealers, gold smugglers and money exchangers so openly converted old currency into new, or into kilos of gold or foreign exchange for a fee. Did they know something the common man didn't? How were they so confident that they would be able to whitewash all their old currency? Numerous small firms in Kolkata and elsewhere have reportedly acted as a conduit for large sums of black money to be transferred onto their books. How long will it take the IT department to unravel this convoluted maze of transactions? Banks showed a 4 percent increase in deposits in the previous quarter when deposits in every quarter have grown by just zero to 1 percent traditionally in the last few years. Who do these deposits belong to? Do some belong to political parties and bureaucrats who were already in the know? Does Modi have the gumption to tax, confiscate and penalise all the political parties' account holders, including his own, in the same way, he has declared for other tax evaders, 30 percent, then 200 percent and then prosecution and imprisonment?

The Aam Aadmi may well wonder if this was all a ploy so the rich could still keep their millions and have it converted into white but it is they who had to pay the price of entering the tax net. And knowing the reputation of the Indian taxman, will it spare the poor when taking its own cut, when they have not spared the wealthy?

The whole demonetisation drive by the Narendra Modi government and the atmosphere of fear and anxiety it has endangered in both HNIs and the common man remind me of one person who has been largely forgotten today, who Modi claims is his political inspiration, Atal Bihari Vajpayee. While Vajpayee was the avuncular figure, adored by us all (at least by me), Modi seems to be the stern patriarch. While Vajpayee's relaxed, laissez-faire attitude seemed to imply that while humans are weak and prone to making mistakes, they should all be forgiven and embraced, even the enemies. Modi's belief appears to be that while there are good people in this world, (imaandar), who should be praised, there are many sinners, (beimaan) who should be taken to task and punished severely for their crimes. Vajpayee seemed to convey there are no good or bad people in this world, and only circumstances make them seem so, and he wanted to be a friend to everyone. On the contrary, Modi seems to think that the world is full of clear and present dangers, and he is surrounded by enemies, both seen and unseen, who must be fought at all costs, and if need be, he is willing to take on all comers alone. To err is human, to forgive is divine, may have been Vajpayee's mantra, but to Modi, it seems that being honourable will bring its own rewards, but I am the champion of the masses who must destroy the dishonourable. Ideas are very potent things, and when one becomes enamoured of one's own ideas and tries to bring them to fruition at any cost, they extract a heavy price. Modi is a highly emotional man, all too attuned to public opinion and craving the applause of the people and their devotion above all else. He keeps saying he has given up his family and his life to serving the nation. But love is the greatest drug of all and can addle the brain. A true leader must rise above public opinion and be inclusive and unemotional in his decisions. When you entrust your fate and your policies into the hands of the public, a dangerously unstable and unpredictable mass of people, it is like selling your soul to the devil. The pleasures of public adulation may be great but momentary, but soon you will realise it has you by the gonads and can destroy you. When Modi triumphantly declares that this is the amount of money we have destroyed or taxed it may make little impact, or even have a boomerang effect, as people will only remember their own business losses and the tremendous strain they were put through, and may even demand that the government puts a share of the recovered money directly into the pockets of all the poor people who suffered due to the loss of workdays or business earnings.

I wish to make one thing clear. I believe Narendra Modi's intentions in the demonetisation drive are very well-meaning and quite bold, a move which no other party has dared to initiate in quite this way since Independence. At least he has decided to do something instead of sitting on his hands and spouting platitudes, for fear of the repercussions of bringing 85 percent of the cash economy to a grinding halt. He is devoted to his job, and he believes it is always important to do something than nothing at all. But could always trying to prove that one is doing the right thing become counterproductive. Is it always more important to be a man of action than a man of ideas and foresight?

Does being a leader of the people mean always trying to take fate into your own hands? He is a man of ideals, which may be good for political rhetoric during campaigns like the Swachh Bharat drive, but sometimes, being in thrall to an idea, one fails to take into account the far bigger truths about the reality of human nature and the forces driving human endeavour and human acquisitiveness. So the government is willing to forego the recovery of lakhs of crores of rupees which could have been used in the development of the country simply to prove its point, but this will not help build a single highway or hospital. Public opinion is fickle. The much-loved and hugely successful Atal Bihari Vajpayee was unable to win a second term in spite of being one of India's most popular prime ministers, not to mention the booming economy and numerous successful social initiatives he was credited with during his tenure. If the argument is that his India shining did not include the poorest of the poor, the same logic now applies here. As I heard many waiting in the long lines at the ATM ask repeatedly, do you see even one rich person waiting with us? Even now, has a single person standing in a queue been able to open a bank account so he can deposit his savings. Marriages are unable to take place; homes cannot be built. Fields cannot be sown, and loans cannot be obtained or repaid. People are running like headless chickens to gather enough money to pay at private hospitals. It is this silent majority who will decide if Modi's attempt to clean up the system at such a high cost pays off, not the Twitterati. Money is at the root of all suffering, which Modi might discover to his cost.

A great leader does not demonise people. Many tax evaders are people like you and me who may have found it more prudent to store their money instead of paying more taxes to governments who they believe to be inherently corrupt and who have nothing much to show for the lakhs of crores in taxes that have been paid in the many decades since Independence. If the government doesn't help you, you must help yourself is the motto of many Indians. It is these ingenious and hardworking people, who become rich, and it is a natural human instinct to try hold onto the fruits of your labour, and it is assumed that intelligent people will find more and more ingenious ways to protect their savings from the taxman, especially in a country where the taxman himself is so corrupt.

Not paying all your taxes does not make you akin to a murderer or a rapist. This tug of war between the government and taxpayer is as old as the hills, ever since the concept of taxes was invented. Though governments today see the tax evader as the criminal, the tax evader, in turn, sees the government as the greedy and grabbing tyrant which charges him 30 to 40 percent tax for money honestly earned, and which it fritters in mindless development schemes and in lining the pockets of corrupt officials and politicians. He firmly believes that none of those who are in power is qualified to earn even a fraction of the money he has done through his talent, intelligence, hard work or luck, and therefore have no right to enjoy his precious earnings. If you deposit 2.5 lakh, you are good, but if you deposit ten times of that, you are bad, though you may have worked hard all your life, much harder than the ones with ten times less, saved every penny and not indulged in conspicuous consumption of buying luxury apartments or cars.

If the BJP was in the opposition and another political party had tackled the black money problem by abusing black money hoarders, and slyly pointing out that they throw away their money in temple hundis or rivers, they would be declared as traitors.

Let me end by spouting the usual disclaimers. I have nothing against the government's black money drive per se. It is the modus operandi which seems disturbing. Perhaps this historic campaign will result in the legacy Modi so dreams of leaving behind – an honest, prosperous and corruption-free society. This disclaimer becomes all the more necessary as the Modi Government has also started a drive against the media. You are either with us or against us, they say, and if you publish against us, you will be punished, by being deprived of government ad revenue. This is especially true with the smaller newspapers and news channels. But there comes a time when you have to speak up if you feel strongly about something, putting all considerations of profit and loss aside.

Whether what the government has done will ultimately benefit the nation, only time and the confabulation by experts will tell. But I have my doubts. It is not easy to change human nature. The past is littered with the legacies of leaders who only wanted to do good for their people, only to end up on the dung heap of history. Hitler only wanted the German people to regain their lost pride, Margaret Thatcher to create a more prosperous Britain, George Bush to wipe out terrorism from the world. You may start out with the best intentions, but fate may throw you a curveball so that you find history repeating itself over and over again.