Aadhar controversy

What explains the desperation to make Aadhaar mandatory for tax returns after July 1, 2017?

Aadhaar was missing from the Bharatiya Janata Party’s election manifesto and there was no such mention in Finance Bill 2017.

How desperate is the government of India to get everyone under its Unique Identity number project, Aadhaar? What is this extreme urgency to force everyone to get an Aadhaar number, while the case on the constitutionality of Aadhaar is yet to be determined by the Supreme Court? Why the sneaky tactics?

In a move that is in violation of the Supreme Court order of not making Aadhaar mandatory, the Union government has introduced amendments to the Finance Bill 2017 at the last minute, making Aadhaar mandatory for filing taxes. The amendments state:

“Every person who is eligible for an Aadhaar number shall, on or after the 1st day of July 2017, quote Aadhaar number,

(i) in the application form for allotment of the permanent account number

(ii) in the return of income”

Failing the quoting of the Aadhaar number in the income tax filing, the government will have the right to cancel the user’s permanent account number. These amendments were not a part of the Union Budget announcement earlier this year, and were slipped in yesterday: the Finance Bill on the Indian Budget website, makes no mention of Aadhaar.

The Finance Bill is being considered today for passing in the Lok Sabha.

Why make Aadhaar mandatory for tax returns?

What is the point of a PAN number then? There isn’t.

What the government of India is trying to do is take multiple identity documents and combine them under a single identity number, so that all other historical IDs become redundant. However, as is evident in this case, the PAN number isn’t going anywhere: it will still be required for tax filings, so Aadhaar is another layer of identification mechanism added on top of an existing one.

If the idea behind Aadhaar was to make give everyone an ID, why is it being forced on people who already have an ID for filing taxes?

An opinion piece in the Financial Express last month saw this coming, and saw it as an attempt to link tax filing to information of money and transactions available in bank accounts. While highlighting that out that out of “a total of over 24 crore PANs, the latest data indicate that only 97,33,664 have been linked to Aadhaar through e-returns”, it pointed out that an advantage of linking Aadhaar to PAN will “be a big source to gather banking transaction information, which can be an important indication of a person’s income profile.”

So, to put it simply:

Forcing digital transactions forces everyone to use accounts to make payments. Linkage of Aadhaar to bank accounts gives access to bank accounts. Linkage of Aadhaar to PAN number gives government ability to compare tax filings with bank accounts and payments.

An additional benefit is that the Income Tax department will be able to profile citizens according to their spending behavior, if it is allowed to do so, unless there are provisions in law preventing this.

For that we’ll need a privacy law. But a few things need to be pointed out:

1. Violation of Supreme Court guidelines

This appears to be in violation of the Supreme Court ruling of not making Aadhaar mandatory for citizens for all but a few services, while the court determines the constitutionality of Aadhaar and whether privacy is a fundamental right or not. It’s worth noting that the Aadhaar act fails in terms of guaranteeing privacy, and allows for mass surveillance of citizens under the guise of “national security”, a term which is vague and undefined under law. Citizens have no recourse under the law, and Section 47 of the Act prescribes that only the Unique Identification Authority of India can file a criminal complaint for theft of data.

What is this but contempt of court? The Supreme Court of India appears to be turning a blind eye to the government’s violation of its order: are laws and orders only valid when the SC chooses to enforce them?

Why the hurry?

Here’s a guess: By the time the government is done with getting everyone on Aadhaar by making it mandatory, in violation of the Supreme Court order, the Supreme Court ruling will become redundant: Aadhaar will stay because it’s too big now to fail, and too much money, time, effort has been spent on piecing this together. Thus, pace is important for the government.

2. The issue of the single identifier and linked databases

Unlike the United States Social Security Number, Aadhaar is being used as an identifier to link databases, which makes it easy for government officials to gain access to personal user information, such as bank records, education data, health records, and for surveillance of phone calls and data usage. Until Aadhaar, this data was not linked, but as we are aware, schools are now mandating Aadhaar numbers, Banks are pushing customers to get one, and even the Supreme Court has asked the government to link Aadhaar to mobile numbers.

3. The BJP’s U turn on Aadhaar

Lest we forget, the PM Narendra Modi had publicly criticised Aadhaar when he wasn’t the PM:

Note that Aadhaar was missing from the Bharatiya Janata Party’s election manifesto. Now it appears to have become their main focus.

4. No privacy law in India

India doesn’t have an privacy law, and the attorney general, Mukul Rohatgi, has even argued in Supreme Court, that there is no fundamental right to privacy, saying, “Violation of privacy doesn’t mean anything because privacy is not a guaranteed right”

Someone needs to file a petition in the Supreme Court, seeking a stay, or at least pause this expansion of Aadhaar’s mandate in the absence of a SC ruling on it.

A version of this article first aapeared on medianama.com

We welcome your comments at letters@scroll.in.
Sponsored Content BY 

Behind the garb of wealth and success, white collar criminals are hiding in plain sight

Understanding the forces that motivate leaders to become fraudsters.

Most con artists are very easy to like; the ones that belong to the corporate society, even more so. The Jordan Belforts of the world are confident, sharp and can smooth-talk their way into convincing people to bend at their will. For years, Harshad Mehta, a practiced con-artist, employed all-of-the-above to earn the sobriquet “big bull” on Dalaal Street. In 1992, the stockbroker used the pump and dump technique, explained later, to falsely inflate the Sensex from 1,194 points to 4,467. It was only after the scam that journalist Sucheta Dalal, acting on a tip-off, broke the story exposing how he fraudulently dipped into the banking system to finance a boom that manipulated the stock market.

Play

In her book ‘The confidence game’, Maria Konnikova observes that con artists are expert storytellers - “When a story is plausible, we often assume it’s true.” Harshad Mehta’s story was an endearing rags-to-riches tale in which an insurance agent turned stockbroker flourished based on his skill and knowledge of the market. For years, he gave hope to marketmen that they too could one day live in a 15,000 sq.ft. posh apartment with a swimming pool in upmarket Worli.

One such marketman was Ketan Parekh who took over Dalaal Street after the arrest of Harshad Mehta. Ketan Parekh kept a low profile and broke character only to celebrate milestones such as reaching Rs. 100 crore in net worth, for which he threw a lavish bash with a star-studded guest-list to show off his wealth and connections. Ketan Parekh, a trainee in Harshad Mehta’s company, used the same infamous pump-and-dump scheme to make his riches. In that, he first used false bank documents to buy high stakes in shares that would inflate the stock prices of certain companies. The rise in stock prices lured in other institutional investors, further increasing the price of the stock. Once the price was high, Ketan dumped these stocks making huge profits and causing the stock market to take a tumble since it was propped up on misleading share prices. Ketan Parekh was later implicated in the 2001 securities scam and is serving a 14-years SEBI ban. The tactics employed by Harshad Mehta and Ketan Parekh were similar, in that they found a loophole in the system and took advantage of it to accumulate an obscene amount of wealth.

Play

Call it greed, addiction or smarts, the 1992 and 2001 Securities Scams, for the first time, revealed the magnitude of white collar crimes in India. To fill the gaps exposed through these scams, the Securities Laws Act 1995 widened SEBI’s jurisdiction and allowed it to regulate depositories, FIIs, venture capital funds and credit-rating agencies. SEBI further received greater autonomy to penalise capital market violations with a fine of Rs 10 lakhs.

Despite an empowered regulatory body, the next white-collar crime struck India’s capital market with a massive blow. In a confession letter, Ramalinga Raju, ex-chairman of Satyam Computers convicted of criminal conspiracy and financial fraud, disclosed that Satyam’s balance sheets were cooked up to show an excess of revenues amounting to Rs. 7,000 crore. This accounting fraud allowed the chairman to keep the share prices of the company high. The deception, once revealed to unsuspecting board members and shareholders, made the company’s stock prices crash, with the investors losing as much as Rs. 14,000 crores. The crash of India’s fourth largest software services company is often likened to the bankruptcy of Enron - both companies achieved dizzying heights but collapsed to the ground taking their shareholders with them. Ramalinga Raju wrote in his letter “it was like riding a tiger, not knowing how to get off without being eaten”, implying that even after the realisation of consequences of the crime, it was impossible for him to rectify it.

It is theorised that white-collar crimes like these are highly rationalised. The motivation for the crime can be linked to the strain theory developed by Robert K Merton who stated that society puts pressure on individuals to achieve socially accepted goals (the importance of money, social status etc.). Not having the means to achieve those goals leads individuals to commit crimes.

Take the case of the executive who spent nine years in McKinsey as managing director and thereafter on the corporate and non-profit boards of Goldman Sachs, Procter & Gamble, American Airlines, and Harvard Business School. Rajat Gupta was a figure of success. Furthermore, his commitment to philanthropy added an additional layer of credibility to his image. He created the American India Foundation which brought in millions of dollars in philanthropic contributions from NRIs to development programs across the country. Rajat Gupta’s descent started during the investigation on Raj Rajaratnam, a Sri-Lankan hedge fund manager accused of insider trading. Convicted for leaking confidential information about Warren Buffet’s sizeable investment plans for Goldman Sachs to Raj Rajaratnam, Rajat Gupta was found guilty of conspiracy and three counts of securities fraud. Safe to say, Mr. Gupta’s philanthropic work did not sway the jury.

Play

The people discussed above have one thing in common - each one of them was well respected and celebrated for their industry prowess and social standing, but got sucked down a path of non-violent crime. The question remains - Why are individuals at successful positions willing to risk it all? The book Why They Do It: Inside the mind of the White-Collar Criminal based on a research by Eugene Soltes reveals a startling insight. Soltes spoke to fifty white collar criminals to understand their motivations behind the crimes. Like most of us, Soltes expected the workings of a calculated and greedy mind behind the crimes, something that could separate them from regular people. However, the results were surprisingly unnerving. According to the research, most of the executives who committed crimes made decisions the way we all do–on the basis of their intuitions and gut feelings. They often didn’t realise the consequences of their action and got caught in the flow of making more money.

Play

The arena of white collar crimes is full of commanding players with large and complex personalities. Billions, starring Damien Lewis and Paul Giamatti, captures the undercurrents of Wall Street and delivers a high-octane ‘ruthless attorney vs wealthy kingpin’ drama. The show looks at the fine line between success and fraud in the stock market. Bobby Axelrod, the hedge fund kingpin, skilfully walks on this fine line like a tightrope walker, making it difficult for Chuck Rhoades, a US attorney, to build a case against him.

If financial drama is your thing, then block your weekend for Billions. You can catch it on Hotstar Premium, a platform that offers a wide collection of popular and Emmy-winning shows such as Game of Thrones, Modern Family and This Is Us, in addition to live sports coverage, and movies. To subscribe, click here.

This article was produced by the Scroll marketing team on behalf of Hotstar and not by the Scroll editorial team.