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Rediff.com  » Business » Cash tax? No difference to black money

Cash tax? No difference to black money

By Sunanda K Datta Ray
March 07, 2005 07:17 IST
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My wife is having the kitchen redone. As walls and counters come tumbling down, I grope through clouds of builders' dust after my daily pilgrimage to the bank.

The carpenters and painters, marble cutters and electrician must be paid at the end of every day. The ATM is a wonderful device for this purpose, when it doesn't swallow up your card.

But now, thanks to Palanaippan Chidambaram, I must add 0.1 per cent to the new kitchen's cost. I want to pass it on to the mistries but they won't hear of it. They brought the contractor himself to argue.

"We agreed on a price," he said, "and you must stick to it." But I'm paying the full amount, I plead. It's just that the bank or the finance minister is taking a cut. "That's between you and the bank or the finance minister" growls the contractor. "We don't come into the picture."

I had a sudden brainwave, no doubt inspired by the Budget's high ethical motivation. I agreed on a certain sum, I said, but we did not agree on how it was paid. In an honest society, everyone acknowledges what he receives, down to the last paise. Nothing is concealed.

So, I announced triumphantly, I would pay him by cheque. Account payee too.

The contractor looked at me, the look of a man grown wise and weary in the ways of the world. He asked me to suggest that to the doctor, an eminent specialist with a string of letters, including FRCS, after his name, who had paid us several visits.

The contractor had noted the crisp notes that changed hands after each. He also knew that I had engaged a lawyer to sue the municipal authorities over the exorbitant house tax they had clamped down on me. The lawyer, too, should be asked to take his fees by crossed account payee cheque.

"I am only a humble mistry," he pleaded. "Who am I to object to what my betters think is right? If the doctor sahib and the vakil sahib accept cheque payment, I will also do so!"

The exchange recalled London where the friend I was staying with had a new boiler installed. It was a big job and cost a pretty penny. VAT at 17.5 per cent further inflated the bill.

But as Winston Churchill shrewdly remarked, every legislation invites its own loopholes. A thousand laws mean 10,000 ways of escape. And so my friend, being London born and bred, casually remarked to the plumber that since he didn't hold much with paperwork, they needn't bother with giving him a receipt. The plumber knew exactly what he meant.

'We'll skip the VAT then' he said, and the exchange of broad grins meant perfect harmony. Payment would be in cash.

Then came another part that Chidambaram should know about. Britain has abolished bearer cheques. All cheques come ready printed with two diagonal lines and "A/c payee" between them. Apparently, the aim is not to curb black money but to prevent money laundering.

As reports from Iraq and releases from the Guantanamo Bay camp bear out, there are some fierce young men among British Muslims. Fundamentalist organisations in Asia keep them in funds. Hence the precaution.

But Churchill again, the print on a cheque stops nothing. Half a century ago when I was a student in the north of England, there was a two pence stamp duty on cheques of more than two pounds.

There was usually just about that much money in my account with the Williams Deacons Bank, which -- having disappeared many years ago -- can safely be named. The manager was a nice old man who tried to conserve the little I had and so came up with a novel idea.

I should write out a cheque for £1-19-11d (12 pence to a shilling then, 20 shillings to the pound) and he would give me two pound notes in exchange for a penny. That way, I saved the two pence stamp duty.

It was kind of him. But think what would happen to Chidambaram's ruling if every bank clerk in India were to take a similarly kindly view of the customer's plight! Being India, they would probably want to split the saving.

Not that Britain is much better. I discovered a further new device to stop money laundering (or so they think) when the engineer drove my friend -- with me accompanying them -- to the bank to draw the cash for the boiler.

ATMs there won't for love or money dispense more than £300 per day per person.

The boiler cost a couple of thousand. Since cheques can't be cashed at the counter either -- for the same reason as the "A/c payee" stipulation and ATM restriction -- my friend had to fill in a form for the amount he wanted.

"Reason?" the teller asked and while my friend hesitated, I blurted out, "The plumbing engineers" and received a hard kick in the shin below the counter.

The teller smiled knowingly and counted out the money. But as we left the bank, my friend turned on me and snarled, "You stupid fool! You let her know that I am paying cash and, therefore, avoiding VAT!"

My defence was simple. The knowledge made no difference. Neither will Chidambaram's 0.1 per cent tax to black money. To quote the late Nikhil Chakravarty, it will be like wearing a chastity belt in a brothel.

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Sunanda K Datta Ray
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