Millennium Post

Excessive taxes, regulation, babudom root cause of corruption

One of the world's largest audit and compliance firms KPMG, in its 2011 report Corruption in India, has noted several causes that encourage graft in the country. The report suggests high taxes, excessive regulation and bureaucracy as the major causes.

India has high marginal tax rates and numerous regulatory bodies with the power to stop any citizen or business from going about their daily affairs. This power to search and question creates opportunities for corrupt public officials to extract bribes; each individual or business decides if the effort required in due process and the cost of delay is worth not paying the bribe demanded. In cases of high taxes, paying off the corrupt official is cheaper than the tax. This is one major cause of corruption in India.

Various studies suggests  that in India, like other countries in the world, corruption is caused by excessive regulations and authorisation requirements, complicated taxes and licensing systems, monopoly of certain goods and service providers by government controlled institutions, bureaucracy, lack of penalties for corrupt behavior.

Corruption in India is a major issue and adversely affects its economy. In a study conducted by Transparency International, it found that more than 62 per cent of Indians had first-hand experience of paying bribes or influence-peddling to get jobs done in public offices.  The report says that about 40 per cent of Indians have had first-hand experience of paying bribes or using a contacts to get a job done in a public office.

In 2011 India was ranked 95th out of 178 countries in Transparency International's corruption index list. As of December 2008, 120 of India's 523 Lok Sabha members were facing criminal charges. Many of the biggest scandals since 2010 have involved very high levels of government, including cabinet ministers and chief ministers, such as in the 2G spectrum scam, the 2010 Commonwealth Games scam, Adarsh Housing Society scam, Coal Mining Scam, mining scandal in Karnataka and cash for votes scam.

In October 1993 N N Vohra studied the problem of the criminalisation of politics and of the nexus among criminals, politicians and bureaucrats in India. The report contained several observations made by official agencies on the criminal network which was virtually running a parallel government.

It also discussed criminal gangs who enjoyed the patronage of politicians — of all political parties — and the protection of government functionaries.

Transparency International estimates that truckers pay Rs 22,200 crore ($4.5 billion) annually in bribes. Government regulators and police share in bribe money, each to the tune of 43 per cent and 45 per cent respectively. The enroute stoppages, including those at checkpoints and entry-points, take up to 11 hours per day.

About 60 per cent of these (forced) stoppages on roads by the concerned authorities such as government regulators, police, forest, sales and excise, octroi, weighing and measuring departments are for extorting money. The loss in productivity due to these stoppages is an important national concern. According to a 2007 World Bank published report, the travel time for a Delhi-Mumbai trip can be reduced by about two days per trip if the corruption and associated regulatory stoppages to extract bribes are eliminated.

Officials are alleged to steal state property. In cities and villages throughout India, consisting of municipal and other government officials, elected politicians, judicial officers, real estate developers and law enforcement officials, acquire, develop and sell land in illegal ways. According to The World Bank, aid programs are beset by corruption, bad administration and under-payments. As an example, the report cites only 40 per cent of grain handed out for the poor reaches its intended target. The World Bank study finds that the public distribution programs and social spending contracts have proven to be a waste due to corruption.

Notwithstanding its best intention India enacted the so-called Mahatma Gandhi National Rural Employment Guarantee Act  on August 25, 2005. The government outlay for this welfare scheme is 40,000 crore ($7.56 billion) in FY 2010–2011. After 5 years of implementation, in 2011, the programme is being criticised as no more effective than other poverty reduction programs in India. Despite its best intentions, MGNREGA is beset with controversy about corrupt officials pocketing money.

In August 2011, an iron ore mining scandal became a media focus in India. In September 2011, Janardhana Reddy, an elected member of Karnataka's assembly, was arrested on charges of illegal mining of iron ore in his state. It was alleged that his firm received preferential award of resources, organised and exported billions of dollars worth iron ore to China, without paying any royalty to the state government exchequer of Karnataka or the central government of India, and these Chinese companies made payment to shell companies controlled by Reddy and registered in Caribbean and north Atlantic tax havens. It was also alleged that corrupt government officials cooperated with Reddy, starting from government officials in charge of regulating mining to government officials in charge of regulating port facilities and shipping.
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