Tuesday, December 7, 2010

Bribe tax! – do you know how much to pay and for what services?

Given below is a brilliant analysis by Prof R.Vaidyanathan on the current state of affairs with reference to the Bribe tax, a euphemism for corruption.
He has classified this bribe tax under 10 headings.
But for a lay-person like me, four- fold classification itself is enough.

We pay bribes
(1)   to make the person do his job
(2)   to make the person do his job in time or without delay
(3)   to make the person not to do his job
(4)   to make the person do the job the way we want him to do.

We, the ordinary citizens have experience in the first two areas. The last two belong to the domain of the rich and influential and the politicians. I think the author's suggestion for remedy given at the end of his article will take care of the first two areas that we usually face.  For the rest and the other issues, a honest administration manned by honest people is needed. That this is in acutely short supply in our country is the cause of our ills.

-         jayasree



How to reduce "bribe taxation" by the use of technology


 R Vaidyanathan,
Professor of Finance, IIM, Banagalore.
Tuesday, December 7, 2010 2:27 IST

In India, the index of middle class misery can be measured by adding the tax rate, the inflation rate, and the corruption rate. The last one is not discussed in open forums by experts since they are worried about the next round. Of course, there is a conspiracy of silence among political leaders, since they are the Gangotri of this malaise. There are three types of corruption: retail, wholesale, and stashing of illegal wealth abroad. We call corruption at government offices as a bribe tax since it is imposed on us by the employees of various government organs rather than directly by the government. Here are some examples.

1. Identity establishment: Birth and death certificates/ration cards/passports/caste certificates. The tax varies from Rs200 to Rs1,000 per person per try, depending on bargaining power and urgency. Minimum tax is Rs200.

2 Carrying on trade/business: The smaller the business, the larger the tax. Retail level push-cart vendors pay the police or their agents Rs20-30 a day from daily earnings of Rs100-500. Fast food restaurants pay Rs500-1,000 a week to health inspectors. All retail shops pay bribe taxes varying from Rs500-2,000 a month. Truck/bus operators pay taxes as high as Rs50,000-1,00,000 annually.

3 Utilising services: Government hospitals, schools, electricity boards, water works, RTOs. The bribe tax varies from Rs10 for a bedpan at a hospital to Rs1,000 for power connections to Rs10, 000-40,000 for vehicle fitness inspection certificates. We are not counting the bribes paid for obtaining driving licences. The driving schools take care of that.

4 Turning a blind eye: Traffic violations, illegal construction, use of basement parking as shops, illegal connections, violations of labour law, import of foreign goods beyond limits, raising cattle in the city, felling public trees. The amount is negotiable with a minimum Rs100. For building deviations, it can run into thousands.

5 Reducing waiting time: All government activities. The percentage varies from 2-20% with a minimum bribe tax of Rs200-300.

6 Social sector payments: In case of old age pension, free credit from government schemes, land compensation, riot compensation the tax is 2-50% of the amount. In many situations, the tax is charged after delivery, like American ambulance chasers who collect a percentage as fees after winning a case.

7 Acquiring assets: Land, houses, cars, scooters. These are paid as 'service charges' through the society, dealers, etc. The tax can be 10-25% of the actual tax. Any asset acquired by a citizen entails the payment of bribes if it is to be recognised through registration.

8 Acquiring contracts: For road works, water pipes, cables, bridges, flyovers, houses for low income groups, stadia and parks. The bribe tax varies from 3-5% of the project cost.

9 Large scale :- Corruption in government contracts, defence purchases, export-import deals, and land allotments.

10 Tax havens: Accumulation of illegal wealth in tax havens.

It is interesting that the IT biggies were not the ones who undertook the task of computerising railway reservations. It was done by CMC, which was then a public sector company. The IT biggies were looking at lucrative US and European markets. But the recession in the west altered the picture. Today we find Infosys involved with computerisation of many aspects of income tax, and TCS with passport offices and Wipro with the Employees State Insurance Corporation.

The Bangalore Municipal Corporation has provided facilities to people to pay their house taxes using the internet. You fill in the details of the area of the plot, built-in area, type of construction, etc, and the system shows the tax to be paid. You can pay through your credit card. Earlier, in order to pay the house tax, one needed to bribe officials. India is one of the few countries where you pay bribes to pay your taxes to the government. Clearly, retail corruption can be reduced by technology. In other words, relationship-based transactions are becoming rule-based. Of course, rule-based technology has its limitations in dealing with wholesale corruption, as in defense contracts.

For that we need a transparent regulatory framework and a speedy justice system to punish the crooks.

1 comment:

BK Chowla, said...

It is well known that from getting a birth certificate to a death certificate, one has to bribe.