Thin Dividing Line

Title: Thin Dividing Line – India, Mauritius and Global Illicit Financial Flows

Author: Paranjoy Guha Thakurta, Shinzani Jain

Publisher: Penguin Portfolio, 2017 (First)

ISBN: 9788184005882

Pages: 282

Nobody wants to pay tax if they can help it. This is evident in the mad rush for finding some clauses in the Income Tax Rules which allows money to be exempted from the total income. If nothing can be dug out of the murky depths of the statute book, we look for loopholes in the text of the law. If you are lucky, you’d unearth some precious nuggets. Haven’t you seen people claiming exemption for house rent while still living in their parents’ home? Naturally, entrepreneurs also try to get rid of the tax burden as far as possible. Being backed up by professional talent, they can cook some idea up, which barely satisfies the letter of the law. They are also given a golden opportunity to operate from a foreign country where the tax regime is much lighter. Routing of investment through a foreign channel is risky, but there is scope for doing it without singeing one’s fingers. The dividing line between tax avoidance which is legal (often described as good tax planning) and outright tax evasion which is illegal is a razor thin one. Black money, that is nothing but income not known to the authorities adds to the complexity when it gets mixed up with good money coming in from tax havens. This book is all about the trajectory of foreign investment coming into India and why it should be suspected that a large portion of it is indeed covertly owned by Indians themselves. Paranjoy Guha Thakurta is a senior journalist having an experience spanning four decades and cutting across different media. He is a writer, speaker, anchor, interviewer, teacher and commentator in English, Hindi and Bengali. The co-author, Shinzani Jain, is an independent researcher and a law graduate.

We now know it for certain that India owes the surge in its economic growth to the financial reforms undertaken by Narasimha Rao in the 1990s. This ruffled many feathers of armchair theoreticians and leftist academicians who were already painfully stung by the collapse of communism in 1991. Poverty was the utmost concern in that era. But looking back at our society after the interval of a quarter-century, the good results are there for all to see – poverty has indeed receded, real income levels increased and the infrastructure has recorded a quantum leap. In spite of this, the leftist intellectuals now come up with another criterion to deride the progress made. Rising inequality in income is their present concern! Earlier, the ace criticism was founded on a human emotion – hunger. After 25 years, they quietly buried it and now hook on to another human emotion – jealousy! It is true that corruption and its byproduct of black money are still rampant. The book estimates that between 1999 and 2009, $ 8 trillion was transferred by the elites of developing countries to the developed world. This consisted of permanent transfer of wealth in the form of real estate, bullion and equity investments. Rs. 600,000 crores is reported to have flowed out of India in the year 2012 alone. Since the liberalization of the economy in the 1990s, successive governments in India have expressed great willingness to embrace the current global economic order. Thakurta accuses that at the same time, a substantial section of the population remains poor, illiterate and under-nourished (p.34-5). Such intellectual somersaults cannot hoodwink the discerning reader who can realize that such evils are not caused by liberalization per se. The book gives great emphasis on the unrealistic and politically aligned opinion of leftist academicians and thinkers. JNU professors such as Arun Kumar and Biswajit Dhar permeate the discussion to saturation levels.

This book focusses on the Mauritius route taken by incoming foreign investment because 40 per cent of the total inflow of foreign money is channeled through that country. This island-nation is especially suited for Indian business as two-thirds of the inhabitants of the country are of Indian origin. The then prime minister Indira Gandhi signed a Double Taxation Avoidance Agreement (DTAA) with Mauritius in 1982. This was a measure to promote investment in India which made the profit gained from short-term capital gains tax-free for companies registered in Mauritius. Round-tripping of black money was the result, when Indian companies returned their ill-gotten wealth under the cover of shell companies. The author feels that all governments that ruled India were reluctant to deal with this problem. Participatory Notes (P-Notes) is another tool used by brokers of illicit money to return their booty back to India. P-Notes, also known as ODI (Overseas Derivative Instruments), are financial instruments issued by registered FIIs to overseas investors who wish to invest in Indian stock markets without revealing their identities or registering themselves with the market regulator. These were primarily used for money laundering, speculation and jacking up of share prices. In 2012, 50-60 per cent of all money came in through FII was by P-Notes. However, the government tightened the regulations and by 2016, it has dwindled to roughly 10 per cent.

The logic of the authors is that the foreign investment coming to India consists of black money owned by Indians and money channeled through tax avoidance techniques of companies, especially MNCs. The latter is not exactly illegal as these firms use loopholes in the system. However, since the dividing line between the two is very thin, allegations are heaped on the latter without much substance. All MNCs are made culprits of tax evasion. Apple’s tax avoidance in Ireland is trumpeted as an illustrative example when even that country’s government has appealed against the EU decision to slap a crippling penalty on the American phone maker on the grounds of unfair investigation. The case of Vodafone in India where the company was penalized with a demand notice from the Income Tax authorities for an astronomical sum of Rs. 12,000 crores is also discussed. The authors have miserably failed to present the causes leading to such a notice in a way that can be understood by ordinary readers. Anyway, the Supreme Court of India quashed the notice. Thakurta then comes up with a preposterous argument that the learned judges have not understood the spirit of the law on which they adjudicated. The bureaucracy was not going to take it lying down. They forced the government in 2012 to bring in an amendment to the Income Tax Act and to give it retrospective powers from the year 1962! This change in the rule after the apex court had decided in Vodafone’s favour made that company’s action specifically criminal and at the same time made a mockery of the concept of Rule of Law. Even such a shocking instance of bureaucratic overreach and a clear instance of creating avenues for collecting bribes is justified by the authors on the sole reason that it was directed against an MNC. The authors’ political affiliation to the Left is clearly visible in such arguments. Moreover, regulations such as the GAAR (General Anti-Avoidance Rules) are only going to give more teeth to a corrupt bureaucracy unless more social supervision is put in. It must also be accepted that deregulation and liberalization of the Indian economy led to an acceleration of the outflow of illicit money. The acceleration was caused by the increasing wealth that began to be generated as a consequence of economic reforms and not due to any defects in the policy. It may be remembered that earlier the country’s gold had outflowed in 1991!

The book examines whether the Narendra Modi-led government had kept its promise to bring back black money and sanitize the economic environment in the country. Some measures have been introduced, but the consensus is that it is not enough. The Undisclosed Foreign Income and Assets (Imposition of Tax) Act of 2015 and the Benami Transactions (Prohibition) Act of 2015 are great steps, by giving the government enough muscle to go after the tax evaders. But the results are still awaited. Much discretionary powers are still granted to the bureaucrats. Modi also amended the Mauritius DTAA and made the short-term capital gains taxable. The Voluntary Disclosure of Income Scheme of 2016 exposed assets worth Rs. 65,000 crores, out of which Rs. 30,000 crores was collected as tax. The Demonetisation of 2016 was a courageous decision, but it doesn’t seem to have elicited the results hoped for. Even with these measures, the authors are unhappy with Modi’s perceived friendliness to big business. They even laugh at the concept of ease of doing business.

The book is based on a documentary by Thakurta on black money and the workings of tax havens. Probably, this accounts for one of the main reasons for its aridness. The argument is totally one-sided like the propaganda leaflet of a revolutionary outfit. Opinion is not sought from industry-friendly sources to make the analysis balanced. Even claims made by religious NGOs like the Christian Aid are given prominent attention and used for building up the case against corporates. Each chapter’s heading in the book offers as much readability as those from a thick textbook of accountancy or economics. The book is not at all interesting to read on account of the shallowness and political orientation of the arguments and also because of the fact that it is not reader-friendly.

The book is not recommended.

Rating: 2 Star

The Unending Game

Title: The Unending Game – A Former R&AW Chief’s Insights into Espionage

Author: Vikram Sood

Publisher: Penguin Viking, 2018 (First)

ISBN: 9780670091508

Pages: 282

The need for a state to keep track of what its neighbours are up to was recognized in the ancient world itself, as crystallized in Kautilya’s Arthashastra and Sun Tzu’s The Art of War. At least in this regard, India need not go anywhere for directions, we may think. This is too far from the truth. The drastic changes that are coming in each year, the apathy of the political establishment and the suffocation generally felt in a bureaucratic setup are affecting our intelligence infrastructure in a corrosive manner. The greatest threat in international relations is the emergence of non-state actors, like Islamic terrorism which gets clandestine support from rogue states like Pakistan. Espionage is indispensable in such a scenario to get information on the targets and plans of the terrorists while it is still on the drawing board. This requires planting moles in those organizations and monitoring communications between them. In a democracy, this is easier said than done as the state have to mind the voice of civil society while putting up surveillance measures on telephone conversations and intercepting internet data. The painful question of how much is enough is not going to be settled any time soon. All of these create immense challenges to the intelligence-gathering machinery. This book is an attempt to codify the effort used in the past and needed in the future to smoothen the path of India into the league of world powers in the next few decades to come. Vikram Sood is elegantly suited for this job, since he was a former boss of the Research and Analysis Wing (R&AW – though it commonly goes by an acronym without the ampersand), India’s equivalent of the CIA. He was a career intelligence officer for 31 years and is currently serving as adviser at the Observer Research Foundation, a public policy think tank based in New Delhi. He writes regularly on security, foreign relations and strategic issues.

The US is undoubtedly the fulcrum of the uni-polar world. It reached this pivotal position not by its financial muscle alone. Economic supremacy needed other kinds of domination to protect its interests. This may percolate to the ideological, military, technological and psychological fields too. All are to be accompanied by heightened espionage activities, which involve collection of data of different kinds, its conversion into useful information, processing it into knowledge and the final honing as intelligence to the consumers, which is often the political leadership. Sood makes a fine case for the requirement of intelligence gathering – or espionage, if you are so particular. The targets are to be identified first. Probably judging from experience, he asserts that the targets are easier to penetrate in a state entity than a terrorist organization, because those entities are more easily identifiable and definable and are also loosely controlled.

Having established the need for spying, the author makes an analysis of the tools of the trade, always watchful not to make a complete show of the cards for obvious reasons. The semantic differences between covert, special and clandestine operations are elucidated. The reliability of the sources of information makes or mars the whole operation. Sources which work for money are the steadiest as compared to ideologically motivated ones. The handlers should be careful in dealing with them. Tight purse strings are unattractive, bargaining is ugly but misplaced generosity is a cardinal sin. The book includes many such statements combining several criteria with increasingly strident tone of the adjectives! Deception is a major part of the intelligence game. It is neither ugly nor immoral. By this, the author seems to mean that it is applicable to the public also. They never get to know of a good spy and reads only about botched operations. He who performs invaluable work assigned to him in a hostile country and then retires gracefully to live a quiet, normal life is the perfect spy.

A survey of the premier spy agencies in the global arena is made in the book, which includes those of the US, Russia and China. As in the Cold War era, the leaders manage things so cleverly that a direct confrontation between them does not take place and espionage battles will be waged in neutral countries. Their modus operandi overlaps into domestic monitoring as well, to detect impending threats. The Department of Homeland Security in the US has massively invested in infrastructure for eavesdropping. It was a great blow to them when the exposures of Julian Assange and Edward Snowden came to light. Privacy advocates were stung into action on the realization of the scale of monitoring that was taking place. However, the author makes a note of warning here that the debates about privacy and freedom should be counterbalanced by the dire needs for security and surveillance in view of terror attacks as brutal as 9/11 in the US and 26/11 in Mumbai.

The book presents a skewed picture of things when it attempts to discuss about non-state international groups of industrialists, academics and politicians who are influential in swaying state policy of their respective nations. Sood assigns them great powers and finds them responsible in shaping events that changed the course of history such as the collapse of communism. One such organization is the Piney Circle. Hope you have not heard of it before? Neither do I. It is a right-wing group of politicians and secret agents linked to the Catholic Opus Dei. Ronald Reagan, Margaret Thatcher, Konrad Adenauer and many other heads of state were its members. It worked from 1951 to 1991, battling communism. He claims that Comte Alexandre de Marenches, head of the French secret service and a member of the Piney Circle, advised Reagan in 1980 on how to dismantle the Soviet Union within eight years! There are other organisations that share the credit, such as the Bilderbergers who conceived of a world containing only the rich and the poor by obliterating the middle class. It proposed to do this by birth control through famines and wars. This chapter is an unfortunate one as it looked something amateurish. Secret societies possessing powers to change regimes are what we encounter in a Dan Brown novel, rather than in a non-fiction work by a former chief of the nation’s secret service.

The Russian and American spy agencies vied with each other for space in India during the cold war. Sood mentions a few facts in which Indian politicians received favours from them. Morarji Desai, former prime minister, is said to have accepted a sum of $20,000 each year. Kabir, an organisation run by Aam Admi Party leaders Arvind Kejriwal and Manish Sisodia, is alleged to have received $400,000 from the Ford Foundation which is a cover for the CIA. The veracity of these claims cannot be verified, in view of the R&AW’s hostility towards Desai who tried to clip its wings when he was the premier. Kalugin, a former heavyweight of the KGB who defected, had written that it looked as if India was for sale during the Indira-Rajiv era. As a result, neither the Soviets nor the Americans were enthusiastic on entrusting sensitive information to Indians.

The book assumes a categorically hostile position against Pakistan. It has always been an enemy and will continue to remain so in the foreseeable future. It plots and supports extremist activity with an eye on provoking violence and anarchy in India. Glib talk about a joint fight with Pakistan against terror is meaningless. It is as ridiculous as investigating a murder with the help of the murderer. Even if the Pakistani government by any chance decides to stop its support for terrorists, the country would still be most attractive to the extremists on account of the lack of good governance, weak regulations, absence of rule of law and weak financial institutions and legislation. This makes it a fertile ground for production and export of terrorists to all parts of the world. It is to be remembered that Pakistan appeared in one form or the other in the investigations on each and every terrorist attack that killed innocent people in Europe, America and India.

Readers expecting interesting anecdotes and tasteful case studies from the author’s rich repertoire as the chief of the apex spy body of India are in for a rude shock and disappointment. Probably because of non-disclosure rules, Sood remains mute on them. If secrecy demands silence from the author, he could have stopped from bringing out this book too. ‘No book’ seems to be a better option than an uninspiring one, which does not contribute anything to the reader’s awareness that cannot be gleaned from newspaper columns or current magazine articles. This book is a long collection of platitudes and homilies on the urgent need to change the priorities and practices of a spy organisation to meet the challenges posed by a technologically advanced world.

The book is recommended only to serious readers of international relations.

Rating: 3 Star

The Lost Continent

Title: The Lost Continent – Travels in Small Town America

Author: Bill Bryson

Publisher: Black Swan, 1999 (First published 1989)

ISBN: 9780552998086

Pages: 379

Bill Bryson is the king of travel writing. Just read any one of his works and you are hooked for life. But the trouble with Bryson is that he stimulates such a keen longing in you to see those places and share in his strenuous journey through lesser known places. With Google Street View, we can in fact make it happen somewhat – virtually. This book is about an incredible journey of epic proportions. Born in Des Moines, Iowa, Bryson spent most of his adult life in England where he met his wife. He returned briefly to the US and made this tour of the small towns of the country in two stages in 1987-88. Travelling a staggering 22364 km (13978 miles) across 38 states, the author sets a perfect example for all travel writers. Visit to some towns are a repeat of the childhood trips the Bryson family undertook in the continent. In his inimitable style, he takes the readers along a voyage that transcends time and space. Even after a gap of three decades since the book was first published, the narration is crisp and not even a trace of datedness is visible anywhere, except perhaps the availability of better navigation systems now. Readers are assured of a refreshing experience hurtling along with Bryson in his small car across the mountains and valleys of continental America.

The journey avoids big cities as far as possible and follows small towns that don’t offer any distinguishing features except the ubiquitous motel, restaurant, gas station and a few stores. The author claims that America is a nation so firmly attached to small town ideals and so dedicated in its fantasies to small town notions. This enables them to adopt instant friendliness with strangers. In short, it represents everything good in the mores of the society. The first stage of Bryson’s travel took place in October when autumn was silently shedding its leaves to make way for the onset of winter. The book brings the atmosphere alive with a catching reflection of the afternoon. By four o’clock, daylight was going. By five, the sun would drop out of the clouds and was slotting into the distant hills like a coin going into a piggybank. Cold came in instantly and the traveler would long for home.

One difficulty that flummoxed the traveler was the inability of paper maps to size up in scale to show small roads. The continental size of the nation is also partly to blame. Intersections were not clearly discernible causing Bryson to lose way and wander aimlessly on the back roads. That was an era before Sergey Brin and Larry Page had even thought of founding Google, let alone its nectar for travelers – the Google Maps. There are some remarkable firsthand observations in the book. While encountering the Trump Tower in New York, Bryson makes a prescient statement that ‘a guy named Donald Trump, a developer, is slowly taking over New York, building skyscrapers over town with his name on them’ (p.190). Remember, this was in 1987. Now we know what Trump was really keen on back then! Being the land of plenty and richness, there are so few things that last for more than a generation. Americans revere the past only as long as there is some money in it, says the author in a rather unkind manner overlooking the several huge museums he had gone into.

Readers are amazed to notice the racial tensions prevailing in the South of the country. Traditionally, the South was in favour of continuing with the scourge of slavery and went on a civil war to let the barbarity continue. They lost humiliatingly against the Unionists led by Abraham Lincoln. Racial tensions were still simmering in the background during Bryson’s journey. Interactions between the races seem to be small, as the author could ‘see’ and report about blacks and whites chatting at bus stops and a black nurse and a white one travelling together in a car. The civil rights movement gathered momentum in the 1960s and the process of assimilation had still not reached its goal even after two decades. Mississippi is stated to be still racial, as the author claims that he listened to a radio news broadcast about two black men raping a white girl (p.117). Till a few years ago, blacks were not used to sit in restaurant luncheon counters. This was not against the law, but they simply did not dare to do so. In Appalachia, Bryson observes poverty at its worst, even among the Whites. But this poverty is nothing when compared to that in the third world. Forty per cent of the poorest people in the region owned a car and a third of those had been bought new.

Like any other title by Bryson, this one too is immensely satisfying and a real page-turner. His wit and deft handling of awkward situations provide many hours of pleasure to the reader. Like an ideal patriot, there is nothing which enlivens him more than the sight of his home in Iowa at the end of the grueling journey. The scathing criticism of content in American television is matched only by the biting contempt he feels towards the evangelists and pompous promoters of religion. At the end of the journey, Bryson is grateful not only for the good condition of the car, the pleasant weather and safe roads, but for not encountering a single Jehovah’s Witness on the way.

The book is highly recommended.

Rating: 4 Star