Request to Close Loophole Allowing Political Parties to Launder Black Money
ALERT CITIZENS FORUM OF INDIA
A7/303, Saket CHSL, Saket Marg, Thane (W) 400601 #8879528575
December 21, 2016
The Hon. Finance Minister,
Government of India,
North Block,
New Delhi.
Respected Sir,
Sub: Request to Close Loophole Allowing Political Parties to Launder Black Money
With reference to the above, we submit to you as under:
1) On December 16, 2016, the Revenue Secretary Shri Hasmukh Adhia informed that the political parties are free to deposit old Rs 500 and Rs 1,000 notes in their bank accounts. Shri Adhia also said that deposits in the accounts of political parties are not to be taxed. "If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar".
This basically meant that deposits made by political parties would not be up for scrutiny.
This statement created a lot of controversy.
2) Your good self then took pains to explain that the political parties were not being given any favourable treatment: "Under Section 13A of IT Act 1961, Political parties have to submit audited accounts, income and expenditure details and balance sheets. Post demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders. Any party doing so would be in violation of law."
3) You had added that just like anyone else, political parties can also deposit their cash held in the old currency in banks till the 30th of December provided they can satisfactorily explain the source of income and their books of accounts reflect the entries prior to 8 November.
4) Sir, we humbly state that while they may sound different, the statements of both Shri Adhia and your good self are essentially saying the same thing.
Political parties are currently not required to publicly disclose contributions of up to Rs 20,000.
This rule allows contributors to package unlimited political contributions just below this threshold value completely free of disclosure.
5) This basically means that any political party having received individual donations of up to Rs 20,000 in cash can deposit it in bank accounts. This money will not be investigated simply because these donations need not be publicly disclosed. That is the law of the land.
And that is precisely what Shri Adhia said: "If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar."
And as per your statement, political parties can go through the audits but they still won't have to publicly declare the names of the individuals and institutions, who have donated amounts below Rs 20,000.
6) Let us look at some data from 2014-2015, put together by the Association for Democratic Reforms.
As the report titled Analysis of Income & Expenditure of National Political Parties for FY- 2014-2015 and dated June 3, 2016, points out: "Only 49% of the total donations of the parties came from voluntary contributions above Rs 20,000."
This means that 51 per cent or more than half of the total donations of National Political Parties came from donors whose details are not available in the public domain.
The BJP, Congress, BSP, NCP, CPI and CPM, form the six national level political parties.
7) As the report points out: "A total of Rs 648.66 crores (51% of total donations) of the total donations to National Parties was collected during FY 2014-15 from donors whose details are not available in the public domain."
8) The report makes several other interesting points:
a) BJP collected Rs 434.67 crores (50% of total donations) from donors whose details are unavailable.
b) BSP claims not having received any donation above Rs 20,000, hence no donations details of the party are in public domain. The BSP has been declaring this for 10 years now.
c) NCP is only party which has not received donation below Rs 20,000 during FY 2014-15. Thus all voluntary contributions are available in the public domain.
d) As far as the Congress is concerned, 32 per cent of the donations of the party came from unknown sources.
e) The unknown sources of income are essentially raised through 'sale of coupons', 'relief fund', 'miscellaneous income', 'voluntary contributions', 'contribution from meetings/ morchas' etc.
9) So as far as dealing in cash is concerned, it continues to be the order of the day for political parties. It is worth mentioning here that we are talking about only six national level political parties here.
10) The number of political parties operating in India is significantly more. A PTI report dated August 2015 points out: "According to the [Election] Commission, as on July 24, there are 1866 political parties which are registered with it."
Most of these parties do not fight elections. Then why are they set up in the first place? As former Chief Election Commissioner TS Krishna Murthy recently told The Indian Express: "Many political parties are set up with the sole intention of laundering black money."
11) In fact, there is a possibility that many of these political parties would have been laundering money in the aftermath of demonetisation as well. The law of the land does not stop them from doing that. All they need to claim while depositing demonetised Rs 500 and Rs 1,000 notes into a bank is that it was donated on or before November 8, 2016.
Alert Citizens Forum of India suggests that it would be make tremendous sense for the government to release data on the total amount of demonetised Rs 500 and Rs 1,000 notes deposited by the political parties in banks since November 8, 2016.
A couple of days ago, the Reserve Bank of India (RBI) has come up with another rule.
An individual while depositing more than Rs 5,000 must offer an explanation to at least two bank employees as to why this could not be deposited earlier. The amount will be credited only after receiving a satisfactory explanation. The RBI wants the explanation to be kept on record to facilitate an audit trail at a later stage.
While citizens need to show an identity proof while depositing their old Rs 500 and Rs 1,000 notes into a bank account, political parties can continue to receive donations of up to Rs 20,000 in cash and need not declare who gave those donations. The political parties can deposit the old Rs 500 and Rs 1,000 notes into their bank accounts, and no questions will be asked.
It is our considered opinion that the issue of black money cannot be tackled seriously, without making political funding transparent.
This needs simple majority in the Parliament. The BJP has a majority in the Lok Sabha and can take the first step towards this. It is likely to be supported by some parties in the Rajya Sabha as well.
Even without a majority, the party did manage to get the Goods and Services Tax passed through the Rajya Sabha.
The Election Commission has suggested that "anonymous contributions above or equal to the amount of Rs two thousand should be prohibited."
But why even allow a window of Rs 2,000? Political parties should move towards a totally cashless way of taking donations.
To conclude, we feel that the government should immediately plug this anomaly by amending / enacting laws.
This anomaly which as of now clearly allows political parties to launder black money.
Will something be done on this front or are only the citizens of this country expected to show all the honesty?
Regards,
For Alert Citizens Forum of India,
Dayanand Nene
President
•Activist of Bharatiya Janata Party
•National Secretary: Consumer Protection Service Council.
Alert team: Anirudha Godse, Jitendra Satpute, Prasad Bedekar, Kiran Joshi, Pramod Date, CS Sandhya Malhotra, Ganesh Iyer, Sanjiv Pande, Sudesh Khatawkar, Parikshit Dhume, Swati Bedekar.
A7/303, Saket CHSL, Saket Marg, Thane (W) 400601 #8879528575
December 21, 2016
The Hon. Finance Minister,
Government of India,
North Block,
New Delhi.
Respected Sir,
Sub: Request to Close Loophole Allowing Political Parties to Launder Black Money
With reference to the above, we submit to you as under:
1) On December 16, 2016, the Revenue Secretary Shri Hasmukh Adhia informed that the political parties are free to deposit old Rs 500 and Rs 1,000 notes in their bank accounts. Shri Adhia also said that deposits in the accounts of political parties are not to be taxed. "If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar".
This basically meant that deposits made by political parties would not be up for scrutiny.
This statement created a lot of controversy.
2) Your good self then took pains to explain that the political parties were not being given any favourable treatment: "Under Section 13A of IT Act 1961, Political parties have to submit audited accounts, income and expenditure details and balance sheets. Post demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders. Any party doing so would be in violation of law."
3) You had added that just like anyone else, political parties can also deposit their cash held in the old currency in banks till the 30th of December provided they can satisfactorily explain the source of income and their books of accounts reflect the entries prior to 8 November.
4) Sir, we humbly state that while they may sound different, the statements of both Shri Adhia and your good self are essentially saying the same thing.
Political parties are currently not required to publicly disclose contributions of up to Rs 20,000.
This rule allows contributors to package unlimited political contributions just below this threshold value completely free of disclosure.
5) This basically means that any political party having received individual donations of up to Rs 20,000 in cash can deposit it in bank accounts. This money will not be investigated simply because these donations need not be publicly disclosed. That is the law of the land.
And that is precisely what Shri Adhia said: "If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar."
And as per your statement, political parties can go through the audits but they still won't have to publicly declare the names of the individuals and institutions, who have donated amounts below Rs 20,000.
6) Let us look at some data from 2014-2015, put together by the Association for Democratic Reforms.
As the report titled Analysis of Income & Expenditure of National Political Parties for FY- 2014-2015 and dated June 3, 2016, points out: "Only 49% of the total donations of the parties came from voluntary contributions above Rs 20,000."
This means that 51 per cent or more than half of the total donations of National Political Parties came from donors whose details are not available in the public domain.
The BJP, Congress, BSP, NCP, CPI and CPM, form the six national level political parties.
7) As the report points out: "A total of Rs 648.66 crores (51% of total donations) of the total donations to National Parties was collected during FY 2014-15 from donors whose details are not available in the public domain."
8) The report makes several other interesting points:
a) BJP collected Rs 434.67 crores (50% of total donations) from donors whose details are unavailable.
b) BSP claims not having received any donation above Rs 20,000, hence no donations details of the party are in public domain. The BSP has been declaring this for 10 years now.
c) NCP is only party which has not received donation below Rs 20,000 during FY 2014-15. Thus all voluntary contributions are available in the public domain.
d) As far as the Congress is concerned, 32 per cent of the donations of the party came from unknown sources.
e) The unknown sources of income are essentially raised through 'sale of coupons', 'relief fund', 'miscellaneous income', 'voluntary contributions', 'contribution from meetings/ morchas' etc.
9) So as far as dealing in cash is concerned, it continues to be the order of the day for political parties. It is worth mentioning here that we are talking about only six national level political parties here.
10) The number of political parties operating in India is significantly more. A PTI report dated August 2015 points out: "According to the [Election] Commission, as on July 24, there are 1866 political parties which are registered with it."
Most of these parties do not fight elections. Then why are they set up in the first place? As former Chief Election Commissioner TS Krishna Murthy recently told The Indian Express: "Many political parties are set up with the sole intention of laundering black money."
11) In fact, there is a possibility that many of these political parties would have been laundering money in the aftermath of demonetisation as well. The law of the land does not stop them from doing that. All they need to claim while depositing demonetised Rs 500 and Rs 1,000 notes into a bank is that it was donated on or before November 8, 2016.
Alert Citizens Forum of India suggests that it would be make tremendous sense for the government to release data on the total amount of demonetised Rs 500 and Rs 1,000 notes deposited by the political parties in banks since November 8, 2016.
A couple of days ago, the Reserve Bank of India (RBI) has come up with another rule.
An individual while depositing more than Rs 5,000 must offer an explanation to at least two bank employees as to why this could not be deposited earlier. The amount will be credited only after receiving a satisfactory explanation. The RBI wants the explanation to be kept on record to facilitate an audit trail at a later stage.
While citizens need to show an identity proof while depositing their old Rs 500 and Rs 1,000 notes into a bank account, political parties can continue to receive donations of up to Rs 20,000 in cash and need not declare who gave those donations. The political parties can deposit the old Rs 500 and Rs 1,000 notes into their bank accounts, and no questions will be asked.
It is our considered opinion that the issue of black money cannot be tackled seriously, without making political funding transparent.
This needs simple majority in the Parliament. The BJP has a majority in the Lok Sabha and can take the first step towards this. It is likely to be supported by some parties in the Rajya Sabha as well.
Even without a majority, the party did manage to get the Goods and Services Tax passed through the Rajya Sabha.
The Election Commission has suggested that "anonymous contributions above or equal to the amount of Rs two thousand should be prohibited."
But why even allow a window of Rs 2,000? Political parties should move towards a totally cashless way of taking donations.
To conclude, we feel that the government should immediately plug this anomaly by amending / enacting laws.
This anomaly which as of now clearly allows political parties to launder black money.
Will something be done on this front or are only the citizens of this country expected to show all the honesty?
Regards,
For Alert Citizens Forum of India,
Dayanand Nene
President
•Activist of Bharatiya Janata Party
•National Secretary: Consumer Protection Service Council.
Alert team: Anirudha Godse, Jitendra Satpute, Prasad Bedekar, Kiran Joshi, Pramod Date, CS Sandhya Malhotra, Ganesh Iyer, Sanjiv Pande, Sudesh Khatawkar, Parikshit Dhume, Swati Bedekar.
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