Finance Bill 2017: Does Modi’s Government Hate Transparency?

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Indian Parliament, New Delhi © jacus

India’s Finance Bill 2017 seems to create more problems than it sets out to solve.

Ever since Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) swept the polls in India’s most populous state, Uttar Pradesh (UP), earlier this year, it seems like the BJP will be unstoppable in the 2019 national polls. Out of 403 seats in UP, the BJP won 312, setting a new record after beating the one set by former Prime Minister Indira Gandhi. The Indian National Congress party is in a lull, with its reliance on the Gandhi scion Rahul fading into the recesses of India’s vibrant democracy with every failure.

Amidst this impressive victory stand, the people who have been most affected by Hindu right-wing rule — students, liberals, atheists — are those who oppose the worldview harbored by the BJP. While Modi’s charisma woos many, there are others affected by his party’s my-way-or-the-highway style of politics.

The BJP created a stir in March by passing the 2017 Finance Bill, touted by many as being purposefully exclusive. The Rajya Sabha — the Council of States, the upper house of India’s parliament — where the opposition has a stronghold, was bypassed by tabling the bill as a money bill. In this type of legislation, the Rajya Sabha can only recommend changes, which may or may not be accepted by the lower house, the Lok Sabha (Council of the People), while passing the bill.

The Rajya Sabha is an important institution in India as it is a representative of the states, not the people. Most members are indirectly elected through state and territorial legislatures, and the house has the power to stop the passage of or suggest amendments to bills that may have problematic clauses.

The Lok Sabha is wary of swaying to populism, as its representatives are directly chosen by the public. The way Arun Jaitley, the finance minister, made sure that the bill was passed with limited opposition brought a very important question out to the fore: Are the provisions of this bill so problematic that it mandated it to be passed through a legislative loophole?

Finance Bill 2017

The Finance Bill, if studied in its true form, brings up many questions and answers few. It has been labeled a “regressive” bill by the media in India. To understand the bill, one needs to understand its most problematic clauses.

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First of all, it makes the Aadhaar card mandatory for a Permanent Account Number (PAN) card – a personal ID for tax payment in India. The Aadhaar, on the other hand, is a unique identification system introduced by the government, akin to a National Insurance Number in the UK or Social Security Number in the US. The Indian government proposes to link integral information such as fingerprints and retina scans of each individual to their Aadhaar number, creating a central database of all citizens. According to the new bill, all individuals who now apply for a PAN card have to link their Aadhaar card details to it. Not doing so makes it a criminal offense. The Finance Bill also mandates those currently holding a PAN card to link their Aadhaar details to it.

However, speculation about data breaches are rife, even after top government officials like Amitabh Kant — the chief executive officer of NITI Ayog, the National Institution for Transforming India — have come out in support of the Aadhaar, saying that it has “strong privacy provisions.” Aadhaar card details are reportedly being used by some companies, with users complaining that their details are appearing on company databases, prompting concerns about whether consumer data can now be collected at the click of a button.

When the government implemented its controversial demonetization policy in 2016, the aim was to get rid of black money. While it saw some initial success, demonetization also made life easier for tax evaders by introducing the 2,000-rupee note. Notes of a higher denomination make the illegal hoarding of larger amounts of money much easier.

The Finance Bill now proposes to remove the clause that mandates income-tax officers to provide a reason for raiding a person’s home or assets if suspected to be hoarding black money. The bill also allows the government to seize any property if it is in “the interest of revenue,” meaning the government can requisition a property for up to six months. The bill mandates no provision to explain if the property will be returned after that timeframe.

The issue of tax compliance is complex, for it can be seen that the higher the degree or need for compliance, the higher the probability of evasion. Also, the higher the income, the higher the chances of evasion. According to an industry executive, the Finance Bill now gives power to authorities to target those people with higher income, and not giving a reason for the this will allow a thorough investigation.

However, at the other end of the spectrum lies the argument that innocent people will be subjected to arbitrary checks and, in certain cases, arrest, which is a violation of a person’s privacy.

Political Party Donations

For the first time in India, a bill has mandated a policy for political donations, albeit with its share of controversy. Political donations have always troubled parties in India. Now, thanks to the Finance Bill, any individual or company that wishes to donate to a party’s cause can do so via electoral bonds issued by a bank. While the bank will maintain a record of the bond, it is not bound to disclose the person’s identity. The cap on funding, which was previously set at 7.5% of a company’s net profit in a timeframe of three years, has also been removed.

This can have two consequences: Either it can systematize donations to political parties through a legal channel, or shield certain politicians and political parties who receive bloated donations from industrialists. Finance Minister Jaitley has argued that this clause was necessary to protect companies on the basis that, if it is revealed that a company has donated to a particular party, other parties will pressurize it to donate to them as well. Yet the reason why the cap on funding has been removed was not elaborated. A plausible explanation for why the reason was not disclosed can be the fact that the BJP government is trying to rationalize political donations through a known channel, or it is trying to shield itself and others from scrutiny over the money it receives from big industrialists.

Indian media have picked up this particular point of political donations as extremely problematic, but donations to political parties are controversial in almost every country. Former South Korean President Park Guen-hye was impeached after it was revealed that she and her close friend, Choi Soon-sil, took donations from conglomerates such as Samsung and Lotte in exchange for political favors. In India, Modi was accused by Rahul Gandhi of seeking support for his electoral campaign.

Mergers

Post-independence, tribunals were introduced in India to expedite the resolution of administrative and tax-related disputes. However, their purpose was not served as courts became bogged down by bureaucracy. The Finance Bill has proposed the merger of certain tribunals, such as airports and highways authorities.

According to a senior lawyer, the move to merge certain tribunals could be to streamline their activities. But the rationale behind the merger seems very unclear. For example, the logic to merge the Airports Economic Regulatory Authority of India with the Telecom Disputes Settlement and Appellate Tribunal makes little sense.

The National Highways Tribunal is also proposed to be replaced by the Airport Appellate Tribunal — another merger that makes no sense. The appointment and removal of tribunal members under the government’s control is also a problem: This can mean an assault on their independence. Tribunals are important as they are autonomous bodies that expedite the redressal process.

The government has not revealed the logic behind these proposed mergers, and if they come through, these could create more problems than they solve. It is possible that certain disputes will go unnoticed or overlooked. For example, an issue related to environmental concerns over the construction of an airport may go unaddressed or delayed.

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A Need for Transparency

The merger should have been straightforward enough to escape criticism. But, like many measures, the BJP government’s move is under scrutiny for not explaining measures clearly.

Every democratically-elected government is required to provide a basic service to it citizens — a transparency in the workings of government structures. Modi’s government may have passed the Finance Bill by bypassing the Rajya Sabha, but its clauses will have an impact on people’s everyday life. Citizens are now liable to become tax evaders if they do not register for an Aadhaar card, and their property is subject to legal requisition if the government feels so.

The BJP government has steamrolled its opponents and has had its way ever since it took power in 2014. But its reputation as a transparent party has been tarnished owing to moves that have discarded the opposition’s input. The weakness of the Indian National Congress party may benefit the BJP in the short term, but, in the long run, only a party that believes in transparency, clarity and freedom of speech can survive in a democratic system.

Whether the Finance Bill will create more problems than it seeks to solve is a question that only time will answer. As it currently reads, the bill fails to do so.

*[This article was updated on May 30, 2017.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Photo Credit: jacus

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