A few days ago, former Chief Election Commissioner T. S. Krishnamurthy dropped a bombshell of sorts. While on the CNN-IBN channel’s ‘Last Word’ programme, the CEC said since 2004 the watchdog had been sending the Finance Ministry affidavits of contestants declaring assets, but the Ministry had chosen to do very little about them.
One is shocked by the unwillingness of the Finance Ministry to act against those harbouring black money in the political class.
Had the Ministry acted on the affidavits, it would have, for example, asked BSP supremo Mayawati how her wealth registered such a quantum jump in such a short span of time. Her massive house in Delhi’s Sardar Patel Marg, which lies cheek by jowl with Diplomatic Enclave has been valued at Rs 486 crore by The Indian Express, though she says it is worth just Rs 62 crore.
Some years ago, Mayawati got away with a facile explanation that her wealth of Rs 130 crore was largely gifts received from her doting supporters.
Income gifts At one point of time, gifts were a convenient alibi for unexplained wealth. Not anymore. The income tax law deems gifts beyond Rs 50,000 received during a year as the recipient’s income. One must, however, hasten to add that it was not Mayawati alone who got away with such a facile explanation when the good times lasted.
More than two decades ago, the Direct Taxes Committee headed by renowned economist Raja Chelliah bemoaned that tax authorities were not making income and wealth tax assessments in tandem.
To a trained eye, inconsistencies between wealth and income would stand out. Yet, the Finance Ministry has been unable to make use of information provided by the Election Commission. Was this inaction deliberate? Acting on the EC tip-off might have opened a can of worms involving all political parties. The Prevention of Corruption Act, among other things, seeks to nail public servants found with assets disproportionate to their known sources of income. If a minister getting a salary of say Rs 50,000 per month is found having properties worth say Rs 500 crore, it should raise some eyebrows.
To be sure, properties, especially real estate and yellow metal, do appreciate, but it is the job of investigation and tax sleuths to arrive at the truth.
Under the Prevention of Corruption Act, if a public servant does not offer a credible explanation as to the sources of funds that bankrolled his asset acquisition, there would be an adverse presumption — undeclared income was used. Real estate and gold have become excellent avenues for parking one’s ill-gotten income.
The tax laws too can be used to smoke out undeclared income, if simultaneously the information disclosed in the wealth tax return is scrutinised. In fact, this is the single most utility of the wealth tax law, given that it has long ceased to be a major source of revenue to the exchequer.
Tax conundrum Indeed, visible signs of wealth give away one’s income. Which is why countries in South America such as Chile, Argentina and Columbia lay store by them. Columbia at one point of time presumed that a person having a bungalow, yacht or a swanky car or any combination of these to be having a presumed level of income, and taxed him accordingly. In India, such a law would be seen as draconian. Besides, swanky houses, gold and yachts may not be producing any income at all, but it takes income to acquire an asset unless it has been acquired with borrowings. Chelliah, vexed by the tax officials’ indifference, went to the extent of suggesting abolition of wealth tax, given its ringing failure on both counts — revenue generation and facilitating income tax assessment.
But while being cynical, he made another cynical suggestion — to levy wealth tax only on six specified assets which he described as unproductive and which the vested interests latched onto with alacrity. Since 1992 we have been having an apology of a wealth tax in the country.
Indeed, if there is a case for abolishing wealth tax in the country, equally there is a case for abolishing the Election Commission’s requirement that a poll contestant file an affidavit of assets. In sum, a wealth tax dispensation can be put to better use.
(The author is a New Delhi-based chartered accountant.)