Black Money Strikes Back
This morning, I asked a friend in the real estate business what had changed after Indian PM Modi’s strike on black money. He said not much, as he still needs to bribe government officials to get his job done. The only difference was he earlier had black money to pay bribes. But now that black money has disappeared, he has to pay white money as bribes. Since the bribe taker can’t show this as income, the white money becomes black. Weird or what?
Seems like Black Money is refusing to back down and Modi is in for a long battle. In India, if you want anything done in a government office, you have to bribe the official involved. He can’t refuse to do the job as that’s what he’s he’s paid for. But he can delay your job. Your file will move from one official’s table to the another’s in a never ending game of ‘pass the buck’ till you pay up. The officials then get your job done, and share the bribe.
So what kind of people are these bribees who take up government jobs?
They are those who don’t like to work for a living. Private sector jobs pay better, but you can’t getting away without working hard. These people want shortcuts to riches. What attracts them to a career in the government is the possibility of minting money through bribes. After a lifetime of living off bribes, they are definitely not going to suddenly turn honest and resign themselves to a lower income lifestyle.
Modi and his thinktank must have anticipated this. So what will they do about it? Well, Modi isn’t telling, but I’m sure whatever he’s got planned for these guys, is not something they are going to like.
Anyway, there’s this video (in Hindi) circulating in India that talks about a proposal to do away with cash transactions so all financial transactions become traceable. It also proposes that all taxes including Income Tax be abolished, and substituted by just one tax on every bank transaction.
Simple calculations on overall bank transactions in India show even a 2% tax on them, will give the government much more revenue than it’s currently generating from multiple taxes. Once cash goes out of style like in the West, the number of transactions will rise, and the tax could be a lot less than 2%.
The idea is that this tax will generate enough to make the government self sufficient. This removes the need for people to hide income, and so generate black money. Secondly since every transaction can be traced, corruption will become risky, and will gradually die out. If this revolutionary idea succeeds, it could change how governments all over the world approach taxation.
Personally speaking, I think it may work. I spent a few years working in Dubai, a model state with top class facilities in the United Arab Emirates. The country has no income tax, and the state of Dubai doesn’t have any oil revenue either. But the government of Dubai seems to manage just fine.
Where there is a will, there is a way!
