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An Unexploited Option to Prevent Corruption in India: Parity Check Through Frequent Reconciliation of Wealth with Income Tax

Posted: 22 Dec 2015  

Vrajlal K. Sapovadia

Shanti Business School (SBS)

Date Written: December 22, 2015

Abstract

Prologue:

Corruption is like gravity. Everybody on earth witness, feels and influenced but one can’t see. Corruption is ubiquitous, but neither could we see nor can government successfully prosecute. One can escape from force of gravity but not corruption. The rate of corrupt practices runs on principle of acceleration while control mechanisms run on deceleration. Corrupt people find new way of corruption and defeat policy makers’ efforts. This research aims at developing a parity check by scientifically identifying ends of corruption (wealth) and taxing them heavily.

India was ranked 85th among 175 countries in Transparency International's 2015 Corruption Perceptions Index. Report found that 62% of the people had firsthand experience of paying bribe to get job done in public office. Former Prime Minister mentioned that 17% of fund reaches its destination. The causes of corruption in India includes excessive regulations, complicated legal systems, nexus & conflict of interest among people in power, inefficient judicial system, greedy mindset, and lack of transparent laws. One fourth of the law makers are booked for crimes.

Ernst & Young Study reports that Infrastructure, Real Estate, Mining, Aerospace, Defense and Power are most corrupt. A KPMG reports India's telecommunications and government projects as corrupt. 'Corruption in India: The DNA and RNA' reveal that public officials in India may be cornering ₹921 billion, through corruption. Washington-based Global Financial Integrity estimates flow of black money in India is about $8 billion per year. 'The Hindu' reports unofficial estimates over US $1456 billion in black money stored in Swiss banks. Another report estimates they are worth 13 times the country's debt.

Problem:

Majority corruption wealth is shared by politicians, executives and businessmen. It is possible finding missing clue and taxes them heavily. His posh residence in South India was worth ₹101.40 million during 2009 election, in next election it was shown as worth ₹2.32 million. A politician in Western state is contesting election since 1975, files his income in each election to bear minimal. His wealth surprisingly accumulates at geometric progression. Nobody asked how this miracle happens. Economically and arithmetically wealth created is accumulation of past years income minus expenses.

A News reports on a politician in North India disclosed her assets as ₹602.60 million including her husband’s ₹275.50 million. Neither of them filed tax return. The authority didn’t ask for full disclosures including how they acquired such wealth, how it enhanced by multifold. Such increments are seen in most cases of power brokers. The businessman will file income tax return for meager, but while applying for public issue, property will worth millions.

Solution:

There are several general and specific laws to control corruption, they have failed. The current tax law do not allow opening of files older than 5 years. We suggest that every two years, wealth in any form must be reconciled with past year’s income minus inflation. Any accumulation above the declared income must be taxed at 100%.

Keywords: Corruption, Corruption Preventing Mechanism, Corruption Parity Checks

JEL Classification: A00

Suggested Citation

Sapovadia, Vrajlal K., An Unexploited Option to Prevent Corruption in India: Parity Check Through Frequent Reconciliation of Wealth with Income Tax (December 22, 2015). Available at SSRN: https://ssrn.com/abstract=2707006

Vrajlal K. Sapovadia (Contact Author)

Shanti Business School (SBS) ( email )

Opp. Vral Gardens, Off S. P. Ring Road
Shela
Ahmedabad, Gujarat 380058
India

HOME PAGE: http://www.shantibschool.edu.in

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