Friday, August 31, 2012

The phenomenon of Bribe Tax eating up our economy and sense of ethics - article by Prof R. Vaidyanathan

Prof R. Vaidyanathan has been persistently raising the issue of "Bribe Tax" eating up the vials of our economy. A bribe tax is not only a bad commentary on the state of economy but also on how 'bad' we are. Not one person in India can claim that he was not part of this bribe net either as a giver or as a taker. Even if people want to be honest they can not be so. Somehow people are drawn into it.

The other day I had the peculiar experience of being asked by the person who delivers the gas cylinder to my house to help him in an activity which is corrupt in my view but harmless in his view. He noticed that I go for the gas-refill once in two months and asked me why not I register for refill every 20 days so that he can deliver it to the people who want it when I don't need the gas refill. I was really taken aback by this brazen invitation to be part of his racket and managed to send him without giving him any hope.

But that is not all. Corruption is already happening at the gas-agency itself, even though we are thinking that computerized registration and registration through our mobile phone for refill reduces corruption. For, at times I get an sms informing me of the registration number for the refill and probable date of delivery for my consumer number, when I have not registered for the refill. When I take this to the gas agency, they blame it on some malfunction and ask me to ignore it. How could the computer register my consumer number for refill without me asking for it? This means those who take a long time for refill are noted down and their consumer numbers are used to benefit somebody else. I am a helpless witness to this form of corruption.

There is no end in sight to stop corruption, Though we may bring in electronic- gadget -aided changes to tackle corruption, things will not change completely unless people change.  But we have to keep raising awareness of this menace, as Prof Vaidyanathan has been doing. Given below is his recent article on the extent of Bribe tax in India. A previous article by him on the same subject can be read here:-

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

- Jayasree




Real scam: We pay Rs 4,00,000 cr in 'bribe taxes' a year

By R Vaidyanathan

In this post-Anna, post-Baba Ramdev phase, it seems there is no limit to the brazenness of our netas and babus when it comes to corruption. But then, salt cannot be made more salty.

There is an advertisement, often shown on TV, in which a young boy exhorts his father to be honest and pay taxes, since the money will help the government build infrastructure, etc.  Unfortunately, there is no ad showing the daughter of a government official or politician encouraging him to avoid taking bribes.

Everyday corruption is breaking the backs of the aam aadmi, including the much-reviled middle class. The index of middle-class misery can be measured by adding up the official tax rate, the inflation rate and the corruption rate.

In this article, we attempt to estimate the real cost of bribes and corruption using various calculation methods and assumptions. And here's the big number: the informal "taxes" we pay in the form of bribes probably add up to Rs 4,00,000 crore annually – nearly 6 percent of GDP. Add the big corruption scandals, and the figure could add up to 12 percent of GDP (explained below).

However, this bribe-related taxation is not discussed in open forums by businesspersons since they are worried about the next round of bribe-giving that may fall due. On the contrary, they even take out full-page advertisements to defend the stealing of public money – whether it is the allocation of coal blocks or airport land.

It is smaller businessmen who bear the brunt of this corrupt state. The smaller the business, the larger the share of bribe one has to pay the minions of the powers-that-be. For instance, a retail vegetable vendor earning Rs 400-500 a day may end up paying Rs 40-50 as bribe to the police and other agencies. This comes to nearly 10 percent of his gross income, and a phenomenal proportion of net revenue.

Government employees collect taxes on two accounts – the client account, which is intended for the government's coffers, and the "personal account", for their own pockets. Often, the "personal account" collections significantly exceed what is collected on the government account.

Innovative mechanisms are thought of by government officials to do this, as in the case of a registrar's office in Tamil Nadu where regular "bribe collectors" are employed by officials. This way, even if they are caught, the actual bribe collectors can always deny any wrongdoing.

Collections on the "client account" can be done only by employees in tax-related (like direct and indirect taxes) departments. But "personal account" collections can happen in almost any human endeavour involving the state – and it can be collected through inaction, speed, inducement, lure, threat or intimidation by any government employee or his agent. It is to be noted that without political patronage "personal account" taxes – bribes, in simple terms – cannot exist.

We can call this "bribe taxes" to distinguish them from taxes imposed by budgets. It is also a total solution situation – imposed on us from womb to tomb. To get a birth certificate, parents need to pay a bribe upwards of Rs 1,000 in some states (depending on the number of originals needed). For collecting a death certificate, the payment can run into thousands of rupees if the government official senses that it is important for transferring a huge amount of assets.

Recently, there was a report suggesting that in government hospitals in Bangalore, a newborn child is shown to the mother only on payment to hospital employees engaged to provide this "service" to patients. The "fee" is Rs 300 for a boy baby and Rs 200 for a girl, which reveals an obnoxious gender bias, even in corruption.

Government employees collect bribe taxes from citizens on many counts, some of which are presented in the accompanying table. It is clear that the bribe tax collection is a birth-to-death levy and, more important, is no longer considered improper.

An informal survey was done over the last three years in different parts of an Indian city to obtain an idea of the type of bribe taxes collected in practice and to estimate the amounts changing hands.

This, coupled with various media reports about graft cases/Lokayukta reports published in newspapers, has been used by this writer to arrive at bribe tax details. This does not cover large amounts of bribe taxes pertaining to major/minor projects awarded at the state and central levels. It is estimated that for all categories, the revenue generated in one city on account of bribe taxes could be around Rs 5-8 crore a day. And this is only for those nodal points not directly involved in collecting government taxes.

Based on an average of 250 days of activity in government offices, the annual bribe tax would be at least Rs 2,000 crore in each major city. At the national level of, say, 50 cities/towns (minimal estimate) it adds up to a whopping Rs 1,00,000 crore for 2010-11.

According to the Economic Survey 2011-12, the combined tax receipts of the central and state governments in 2010-11 were Rs 12,37,344 crore. If we use the thumb rule that in general taxes are under-collected upto 20 percent of what is due (again, probably an underestimate), then the actual taxes would have been Rs 15,46,680 crore. The difference of Rs 3,09,336 crore arises out of bribe tax reasons.

Putting the earlier estimate of Rs 1,00,000 crore generated in all government activities plus this estimate of Rs 3,09,336 crore of bribe tax in tax departments, we get an estimate of Rs 4,09,336 as bribe taxes. Our GDP at market prices during 2010-11 was Rs 76,74,148 crore and corruption money thus amounts to nearly 6 percent of GDP.

This is without taking into account the huge corporate transactions on contracts worth billions of rupees on airports, expressways, coal blocks, spectrum allotments, power plants, IT parks, defence purchases, etc. If we add them all, the bribe tax collections would be at least 12 percent of GDP, when the aggregate tax-to-GDP ratio is around 16 percent.

This implies that on a bribe tax plus regular tax basis, our tax-GDP ratio is nearly 30 percent, which is highly comparable to many developed economies. We may conclude that our "effective tax rate" is around 30 percent of our national income, which is twice what is shown as the "nominal tax rate". Hence, the chorus by Leftist economists that India is an under-taxed nation is an untenable theory, based only on regular taxes.

In this case, several hundreds of miles separate reality and Leftist experts. The bribe tax is one of the important reasons why a large number of posts in various government departments are apparently auctioned to the highest bidder by our political masters.

Needless to add, bribe tax collections are done with the connivance and/or encouragement of the top political leaders, who get a large share. The important issue is the use of the humongous amount of bribe tax by receivers. A substantial portion of the unorganised credit market is serviced by bribe tax amounts and the police is said to be emerging as a major credit provider/collector in the unorganised trade and retail markets. This has far-reaching implications for civil society and the credit markets.

The Gangotri of corruption is the illegal money stashed abroad and recycled as foreign direct investment (FDI) or portfolio flows into the country. The brazenness exhibited during the 2G scam and the recent Coalgate scam does not augur well for our republic, since it sends a signal that bribery, thievery and thuggery are all acceptable forms of governance as long as you can use organs of coercion like the CBI and the Enforcement Directorate to arm-twist your opponents.

The activities for which bribes are levied by Netas and Babus

Activities for Own Account Taxes


Acquiring Assets

Land, Houses, Cars, Scooters, --Paid directly or as " Service Charges" through the society, dealer etc, Any Asset Acquired by a citizen entails own account taxes if it is to be recognised by registration.

Carrying on trade/business

Smaller the business larger the percentage. Retail pushcart dealers/ street vendors estimatedly pay police or their agents Rs.20 to Rs. 30 per day from their earnings of Rs. Rs.100 to 500. Fast food restaurants pay Rs. 500 to 1000 per week to the health inspectors of the local municipality.

Identity establishment

Birth certificates/ death certificates/Ration Card/passport/Caste certificates. The amount varies from Rs. 100 to Rs. 1000, depending on the bargaining power and urgency. Minimum is Rs 100.

Acquiring Contracts

For roads, water pipes, cables, houses for low income groups, stadium, parks etc. varies from 1 to 3 percent of the amount

Availing  "Free" services

Government hospitals, schools, Electricity Board, water works, RTO. It varies from Rs 10 for a bedpan service at a government hospital to Rs.10, 000 for vehicle fitness inspection certificate.

Closing the Eye-- Services

Traffic Police, building set-off, wrong construction, basement parking as shops, illegal electric/water/phone connection, violating labor laws. Bringing in foreign goods not allowed above specified limit. Keeping cattle in city, felling public trees etc. The amount is negotiable with a minimum of Rs.100. At the very low level it is paying half the fare in public buses with out ticket.

Provision of Government Gratis


Old age pension, free credit by some Govt. schemes, land compensation, fire compensation, riot compensation. It is again anything between 2 to 50 per cent of the amount. In many situations the "fee" is after delivery like American plaintiff lawyers who collect a percentage


as fees [contingent claims] after winning the case

Reducing Waiting Time

All activities of Government. The percentage varies from 2 to 20 per cent with a minimum of Rs. 100 to Rs.200


The author is Professor of Finance, Indian Institute of Management, Bangalore, The views are personal and do not reflect that of his institution


Sheela said...

Dear Madam,

We Indians normally take things emotional. As someone said an American introduces his brother as "He is my brother just like my friend" and an Indian introduces " He is my friend just like my brother".

Even a Postman was offered cool drinks as an extended member of family.

After Independence during licence raj/ bureaucratic days, Industrial houses and companies while dealing with Government agencies out of goodwill have given gifts in kind on festivals and may be money more voluntarily as a help.

As time passed greed has increased, this goodwill has been made mandatory by system as a demand. For companies dealing with Exim business quantum is huge.

No one knows when will these courtesies transformed into corruption can stop.


BK Chowla, said...

Corruption has now become a disease which needs a surgery,even if patient has to die

Aishu said...

The LPG thing is happening everywhere I assume. My gas cylinder delivery man reminds me to book everytime he comes home. He makes money but assures that he would deliver gas cylinder immediately whenever mine goes empty.
When I think about people who make crores and crores of rupees in just 5 years of their tenure as ministers, this poor gas delivery man is far better. I dont say corruption is good thing. We should start prosecuting people who make enormous money and that would make difference to the economy.

seadog4227 said...

Loss of tradition and traditional values is directly responsible. Also, the fact that nobody is accountable adds to the confusion.
It is possible to take a stand and get work done without a bribe.
Generally, most "officials" cannot handle constant public pressure. 2 examples: I refused to pay a bribe for driving license renewal, wrote a complaint and got the license in 1 day.
Regarding Society dues, we took the concerned builder to court and won in 6-8 months time.
Don't give up.

ASHISH said...

Since the issue is corruption, I bring to notice the Thorium scam now being revealed is Rs 48 Lakh Crore (The missing 195,300 tonnes of thorium, conservatively estimated at $100 a tonne, works out to about Rs 48 lakh crore, putting all other UPA scams in the shade.)

Further, Govt is rejectng Pachauri report & setting up new panel for demolition of RamSethu. Sonia Gandhi's UPA hellbent on demolishing RamSethu.

We as a nation are mere witnesses to the brutal agonies heaped on the motherland by an autocratic aggrandiser.

Could you make a prognosis, Will the evil design on RamSethu be checked?

Ashish Raje

ASHISH said...

Pls re yr comment "Antonia Maino aka Sonia Gandhi's Kertu maha dasa is going to start for her towards the end of Aug 2012.
Chances are that she will be away from active politics."

Your prediction seems true as right now Maino is out of country as per Dr Swamy.

Pls accept my compliments for your noble endeavours in astrology which stand the test of time.

Ashish Raje

jayasree said...

Dear Mr Ashish,

Noted your comment and thanks for the same. Anyway we will wait and see. Rahul's horoscope shows some elevation to importance from January 26th onwards. Lets watch.

From 26th Jan 2013 to 28th June 2014, he will be running Moon dasa- Mercury Bhukthi. Moon and mercury are in each other's asterism. Mercury as lagna lord is eclipsed, by being posited in the 12th from lagna, but it is in the 7th from moon. It is in vargoththama in D-9 and D-10 (for profession). Importantly it is the lagna lord of D-10 and posited in the 9th in D-10. This is the only favouarble feature that can catapult him to elevation in profession of an inherited type during this bhukthi.

Otherwise Mercury is helpless. The reasons are

(1) it is in the 6th in D-9 and in the 12th in neecha in D-16. Thumb rule is that even if a planet is well posited in lagna, its position in D-9 and more importantly in D-16 will decide whether the planet would behave favourably or not. Neecha-hood in D-16 denies any peace or popularity to him in this period.

2.The sign dispositor of Mercury is Venus. Though he is in the 2nd (as 12L and 5L, its position in 2H ensures financial gains to him, but it being in the asterism of weak saturn does not guarantee popular support), it is in neecha in the crucial 10th house in Navamasa. It is once again in the 10th in D-10 but heavily afflicted by melefics.

So he will see a further erosion of popularity for himself and mounting troubles though he will be elevated in position as an inherited gift.

This period starting form Jan, showing his elevation in power, coincides with the onset of Ketu mahadasa for Sonia. This makes me think that Sonia will take a backseat. Rahul would either replace her as UPA chairman or replace MMS.

jayasree said...

Dear Mr Ashish,

Ram Setu will not be and can not be destroyed. Please read my astrological article on that at

Scientists are against the breaking of Ram setu

Srlanka would object to its breaking, because it could cause submergence of many parts of Srilanka. Tamil people must know that if Ram setu is to be broken, only the regions of Srilaankan Tamils would go under water.

A number of articles are there in my blogspot on Ram Setu. You can search and read the articles by picking the titles that address your concerns.

ASHISH said...

I read your article "The in-built protection mechanism of Ram Sethu – astrologically speaking" where in you have stated “Astrology as mother of all sastras.”

Further you mention binding by coral on a seemingly fractured base, IT WILL BE DIFFICULT TO BREAK IT – and "unless the entire coral cover gets removed, there can be no danger to Ramsethu."

The comment is heartening that evil has its limits and it cannot transcend planetary powers (Mars, the celestial Commander General is in defense of Rama Sethu formation!.) Science sans spirits has made us mortals.
One lesson I drew from your article is media is a tool of ruling elites who require masses to be constantly traumatized so that masses do not have wherewithal to revolt against evil rule, the phenomena of rulers/media/judiciary is restricted in 3 dimensions of material world.

We require to become a fearless race imbibed with spirit of celestial forces then no evil can bat an eyelid with its sinister designs. Frankly I read a lot of soul lifting literature but like a wave I hit a crest of hope and sink to the ebb when confronted with the physical world we live in.

Ashish Raje

ASHISH said...

"Raul Vinci career will see a set back once saturn moves into Libra" vis a vis "he will have elevation in profession of an inherited type Raul would either replace her as UPA chairman or replace MMS.

Though you mention erosion in popularity and mounting troubles though he will be elevated in position as an inherited gift.

Does it imply "UPA will survive well into 2014" and nation will suffer due to an aggrandising dynasty.

Ashish Raje

jayasree said...

//Does it imply "UPA will survive well into 2014" and nation will suffer due to an aggrandising dynasty.//

Not necessarily. The coming months are going to be tense. Turmoil in government and in political circle is seen. As far as Congress is concerned it would not so easily move away from dynasty.

ASHISH said...

I am a Mumbai resident and heavy rains impel me to sit at home.
I wanted to break the mundane routine of work and reading about
an evil world we inhabit.

It is your blog I am spending the day throughout. Frankly I became aware of your writing only in 2010. So I am reading from the beginning and I must uninhibtedly inform you your blog is a treasure trove.

Now I reproduce one of your GEM:

"Virgo Super cluster is holding cluster of galaxies in the Universe.

Virgo is the month of Purattaasi, kanni maasam, Bhathrapada, etc.,
when pithrus visit us during Mahalaya paksham starting from Full moon to New moon!!

Our solar system is moving around a system,which signifies a place for pithrus and the time of the year when they travel to earth through the golden rays of Sun
to be with their off-springs,
to receive the obeisance offered to them and bless them in return?

The Supreme Centre holding everything in its arms,
That Purushottaman – ( 3 )

That Brahman –

A terrific and terrifying picture of thousand crores of arms of Him (Purusha) stretching towards thousands of crores of Suns in all directions,spreading on all directions, pervading all directions and all things and non-things in its garbham (womb)

It is just mind-boggling to think of this ‘sweep’– a minuscule of which is felt at sandhya kaalam!"

"No material pleasure can match the ELATION on reading the sublime."

Sadly the psycopath rulers do not deem the same as aggrandisement is the sole concern which engulfs them.

I am continuing my tryst with your writings today.

ASHISH said...

Like all kids I sought to know why we do not see god, I had to wait a long time till I came across your essay titled “Dark matter is the 7th Wind (of the Seven wind currents) of the Cosmos of the Hindu Thought.” and read the most enchanting description of why we do not see god.

“6th current called as Parivaha is the force of gravity that makes all the objects – including the Universes to go in rotational course. The source of this force or current rests with the central axis which can be characterised as the tip of the God's finger as in Vishnu's image holding the Chakra (disc)

So even if we are able to identify the source of gravity, for the entire universe, we will not be 'seeing' God. We will be only seeing his finger tip!”

ASHISH said...

Re your comment
"We cannot 'see' Him, even if man manages to detect the source of Dark matter, for it will only show the design of God's game – of where we go within the frame of that game board. But if man manages to map the game board with dark matter forming the grid pattern, he will understand that there is nothing called randomness or uncertainty or even Free will!!"

When the Supreme Being revelation is key to unravelling the secret of cosmos, Scientists are fools who chase the garden path of Science to chase Dark Matter/Higgs Boson Particle.

We as a majority souless society are also responsible for being the laid the garden path.

The quest for soul/spirit is the real path for mankind.

ASHISH said...

Re your article "India was indeed Shining!"

Anavrishti and Ativrishti, our great ancients considered famine (wet or dry) as an opportunity for renovation works in around the temple and in temple owned lands.

Whereas in times of good rains farmer could concentrate on crop.

What I infer is of our ancient society which was dynamic and not fixated by the vocation as we commoners miserably are in today's world.

Bharat has to cut its chord with West and dig deep into its heritage, to overcome the misery, squalor, depravity, destitution and a be a vigorous nation not a land mass where opportunists rake the moolah and marginalised die of hunger.

Ashish Raje

ASHISH said...

The gems in your article
Planetary connection to El Nino – some tips from rainfall astrology leave me astounded:

viz. The full moon day of Ashada month is another important day to make further corrections in rainfall prediction. On that day the seeds of all crops will be weighed and weighed again the next day to identify which types of crops would grow well in the ensuing season based on the expected rainfall. The ancients even estimated the amount of rainfall that would fall on oceans, tanks and well.

Could you let me know what honest beginning I can make to glean and make an endeavour to understand about our ancient heritage. I do not know Sanskrit.