Tax exemption to parties: It's just tip of the iceberg

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Political parties in India may claim that they 'fight for the cause of the poor' and believe that too much foreign capital is bad for the country's health. They decide on the welfare of the countrymen by opposing, say for example, the entry of Walmart. But when it comes to their own capital gain, the story is just the entire opposite.

Thirteen political parties of the country, including the major ones, were given a tax exemption on at least Rs 2,490 crore between 2007 and 2012. The information was revealed after a Hisar-based RTI activist, Ramesh Verma, made a query. On the income exempted from tax, the Congress (with Rs 1,385 crore) and BJP (Rs 682 crore) accounted for more than 80% of the total.

Parties & their unchecked wealth

The BSP, a party known for its Dalit base, is the third on the list with an income of Rs 147.18 crore in 2007-08, 08-09 and 11-12 fiscals. The party had filed an incomplete return in 2009-10 and had no tax-exempted income in 2010-11. Sharad Pawar's NCP recorded a tax-exempted income of Rs 141.34 crore between 2007-12. The Tax-free income of the JD(U) during this period (except 2008-09 fiscal) is Rs 15.51 crore. Among the main Left parties, the CPI(M) had an income of Rs 85.61 crore in four years (except 2008-09) while the CPI's income in 2008-09 and 2009-10 was found to be Rs 28.47 crore. The JD(S) had an earning of Rs 7.16 crore in 2009-10 and 10-11, LJP 2.55 crore between 2007-11 and the RJD 2.85 crore between 2008-11.

If the whopping figure of Rs 2,490 crore has raised many eyebrows, one may say that it is just a part of the entire game. The income figures of the political parties between 2007-12, as have been received from the income tax authorities, do not include donations or other incomes amounting lesser than Rs 20,000. Political parties are although exempted from Income Tax through Section 13A of the I-T Act of 1961, but they need to maintain books of account for donations or income above Rs 20,000.

Tax exemption does not establish transparency, it just suggests what it is there beneath

Revelation of the tax exemption for the political parties does not establish complete transparency. It is very important to bring the other lesser but important incomes of the parties that come from various sources. A few months ago, two NGOs, Association for Democratic Reforms (ADR) and National Election Watch (NEW) said on the basis of IT returns and list of donors given to the Election Commission (EC) for the 2004-11 period that parties in this country have earned Rs 4,662 crore just by means of donation and other sources since 2004. The Congress, which has been at the helm of the ruling coalition at the Centre, has reportedly earned Rs 2,008 crore followed by the BJP at Rs 994 crore.

The two bodies also said that the income of the parties has increased steadily in the last eight years. The Congress's earnings shot up from Rs 222 crore in 2004 to Rs 307 crore in 2011 and most of its Rs 2,008-crore income came from selling of 'coupons' ever since he had started its stint at the Centre. On the other hand, 81.47 per cent of BJP's income of Rs 994 crore was generated through donations from corporate houses and private trusts, including those based abroad. Parties like DMK received huge donations from its own members.

Politics a lucrative business of quid pro quo

Politics today has changed from a means to serve people to that of a lucrative business in which the power-holders or those close to the power centres claim a stake. Donations and voluntary contributions from influential quarters as a form of bribe define the order of the day and the 'black deals' never see the light of the day because most political parties in India are run as family or private enterprises. There is no point in targeting the Congress alone.

Even a hyper-populist party like the Trinamool Congress, which often boasts about people's interest, ethics and transparency, is not above suspicion when it comes to income. The party led by Mamata Banerjee is one of those parties that did not declare their income accrued from donations from various sources between 2004-11.

While parties like the BSP and CPI(M) were accused of downplaying the donation factor, the TMC, like the National Conference, Kerala Congress, All India Forward Bloc and a few others did not even bother to reveal their positions, despite the fact that the EC has made it mandatory for all parties [under Section 29(C) of Representation of People's Act 1951]. The fact was revealed after the ADR had filed an RTI application to the EC demanding a report on donations received by 42 parties, both national and international, for the period between 2004-11.

Lack of legal force and moral integrity make it a free run

Lack of legal provisions to hold the errant parties responsibility also make it easier for them. An amendment in the RPA is deemed necessary while the ADR has asked the parties to reveal names of donors whose yearly contribution is Rs 20,000 or more. Raising funds through coupons is another aspect that needs to be strictly monitored, the NGO said. But who will bell the cat? We see politicians accused of huge financial scams not only continuing to hold important political posts but also playing decisive roles in allowing a government to survive or collapse.

If political funding is considered as a big source of corruption, the factor that most parties in India are family enterprises makes eradicating the problem of corruption a very daunting task. Political parties are often seen giving loans to their own leaders and there is no proper paperwork to record the transactions. The dynastic nature of the parties undermines transparency in the inner party financial matters and ensures that money movement is free and unchecked. Neither the beneficiaries nor the benefactors care about how the money is being spent and for what purpose. The law, on the other hand, finds itself at the mercy of the political power centres to execute any of the corrupt politicians.

Even organisation-based parties that are not run by families do not maintain a clear record of their monetary gains. Many parties are accused of indulging in extortion at the grassroot level. Cadre-based parties require huge donations to keep their machinery well-oiled and hence always in the look out for income sources. The nexus between evil politicians, unscrupulous businessmen and dishonest administrative officials make it a free run.

The much-sought after transparency will not come till the political parties are made publicly accountable and internally democratic. We can not really expect the private enterprises to make public their financial statements until the members of the political families are made answerable in their public life. But the question is: Is our socio-political culture democratic enough for that to happen?

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