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Why is corruption in India's officers higher than that in West?

    Contents
  1. Introduction
  2. Itemizing discussion on corruption in administration
  3. Why is corruption in income tax dept less in US/West?

Introduction

The purpose of this article is to enumerate and discuss ONLY
  1. factors which increase corruption/nexuses in India's officers, and are absent in West.
  2. factors which will decrease corruption/nexuses in India's officers in US/West, and are present in India.
The purpose of this article is NOT to enumerate factors that are present/absent in BOTH countries. Hence a large number of factors, such as moral values, greed etc will get dismissed as non-issues. Why? Becuase greed is present in US/West as well as India. And moral values/characters are at same level in India as well as West.


Itemizing discussion on corruption in administration

There are about 80-120 different govt depts, such as courts, prosecution, police, prisons, income tax, excise, service tax, sales tax, octroi, wealth tax, pollution control, roads, land records etc. In almost each and every department, the corruption in India's officers is much higher than US/West.

Why?

I will discuss officers of the following departments :
  1. Courts : why are courts in India more corrupt than courts in US? I discussed it earlier. Please click here.

  2. Policemen : why are policemen in India more corrupt than courts in US? I discussed it earlier. Please click here.

  3. Govt lawyers : why are govt lawyers in India more corrupt than courts in US? I discussed it earlier. Please click here.

  4. Taxation : why are officers in income tax, sales tax etc depts more corrupt in India than in West? I will discuss this on this web-page.

  5. comparision of officers other than police, courts, prosecution and tax collection.

While discussing corruption, related harassment and procedures to reduce it, I would classify instances of corruption into following broad categories :
  1. Plain extortion : Consider a case when judge asks for a bribe for issuing a bail. Or when a policeman is threatening confiscation of vehicle if unbribed. Or a pollution control officer is threatening closing and sealing of a factory if unbribed. In such cases, the potential bribe-giver will suffer huge losses on his own legitimate investments or legitimate returns on his legitimate investments if he refuses to pay bribe. IOW, the Minister/officer/judge who is asking for bribe is threatening to create a huge loss on person's capital investment if bribe is not paid. Essentially, this is an extortion. This threat to create a huge loss, harassment and inconvinience is from punitive powers that Minister/officer/judge has.

  2. Mutually benefitial : Lets say a person has NOT evaded any taxes, and he is being scruitinized by a tax-officer. If the officer harasses of threatens to harass the person if unbribed, this amounts to plain vanilla extortion. But say the person has indeed evaded taxes. In such case, the bribe given to look aside is MUTUALLY BENEFICIAL corruption, and not a case of extortion. Similarly consider a case when a violent criminal pays bribe to policeman to look aside. Or when a private contractor wants to sell inferior goods and get more payments than he should get, and he bribes an officer to get his task done. In all these cases, the bribe givers were NOT going to lose any legitimate capital investments or its legitimate returns, but bribe was given to protect illegitimate activities, and obtain illegitimate benefits. This is NOT an extortion, but MUTUAL ILLEGAL BENEFITS. Again, I would classify mutually beneficial corruption into 3 cases :

    • When one individual or a small group of individual is victim : consider a case when a violent criminal bribes a policeman, govt lawyer of a judge to look aside, before or after a crime. In such case, some of the individuals who are victims will try to put a case before citizenry or a subset of citizenry and will try to get the information out. Hence, there is a possibility that the instances of such corruption will come before public.

    • When no specific individual, but whole citizenry is a victim : Consider the case of tax-evasion. When a person evades taxes, non specific individual is hurt, but ALL honest tax-payers are hurt as the tax burden on them increases.

Why is corruption in income tax dept less in US/West?

In US/West, the discretionary power of income tax officers is very limited. They DO NOT have wide powers to send notices, summons, ask to submit records, and power to conduct raid, search etc are very very limited. In India, they have broad powers to send notices, send summons, and submit records.

Basically, in US/West, an officer can send notice if he can first establish that
  1. A person has NOT filed a return

  2. His income tax return is inconsistant with someone else's return : eg A's return says that he paid Rs 1000 to B, while B's return shows no such income recieved from A. In such case, he can summon A or B or both.

  3. The income reported is grossly inconsistent with wealth he owns, and the dept has to first obtain an itemized list of assets accused owns, along with dates of purchase and purchase prises.

  4. When expenses cited by a person is much higher than persons in similar category.

  5. He has been implicated in some serious financial crime or high crime like drug traficking.
and so forth. IOW, power to send notice and scrutinize are very very limited, and can be used ONLY after prima facie doubt is established.

Also, when notices are sent, they have to be pointed and limited in scope. eg say A has reported payment to B of Rs 10000 and B has NOT reported any such income from A. In such case, IT-dept can send notice ONLY wrt A's said payment, and cannot ask B to show all his transactions, bank accounts, records of wealth he owns etc. And asking him to disclose his relative's wealth/incomes is justified ONLY if the accused is implicated in some serious frauds. IOW, in US/West, the scrutiny's scope is limited to "cause of send notice", and scope cannot be extended arbitrily. In India, IT-dept has power to scrutize every entry moment some cause for action is found, no matter how minor the cuase may be. This widens the oppurtunity for corruption.

IOW, discretionary powers of IT-officers in India is much much higher. And due to this they can extract moe bribes.

But this is ONLY half the story. Even though discretionary powers in US/West are less, the evasion of income tax is much much less than India. Why? I explained this earlier, when I explained indexing and cross-indexing of payment, tax and asset records in Govt offices. Please click here to see how indexing reduces tax-evasion, and please click here to see how cross-indexing reduces tax-evasion. For more details, please see the article "why income tax evasion in India is much higher than West".

So should discretionary powers of officers in India be reduced? Answer is YES, but at the same time it is necessary that tax-payers are required to provide cross-indexes while reporting expenes.

In addition, there is one more feature in US/Western income-tax dept which reduces corruption : there is no fized tax investigating officer for a zone. I will eloberate. In India, a typical city/district is divided into 10-50 zones depending on population, area etc. An officer for each zone is fixed for say 2-3 years. The officer is from a cadre of officers, and they are transferred from one zone to another every 2-3 years. But at a given point of time, his zone is fixed. Hence, all returns filed in one area will be screened by a specific officer, who is known in advanced. The officer generally also lives in the SAME city/district he is in-charge of. This makes it trivially easy for local tax-practioners to build nexuses with local officer in-charge. In US, and most Western countries, given a tax return, the officer to screen the return gets chosen at random, and is from a large pool of officers, and he may be located anywhere in US. And the selection process ensures that officer is NOT in the same area as the person whose return is being screened. Hence, a tax practioner or return-filer has NO prior information about which officer may screen the return, and the officer may be anywhere in US. This drastically reduces nexus building.

As a result, the bottom and middle part of IT-dept in US/West is almost nexusfree. And their discretionary power is also minimal. Hence corruption is much less.

Nevertheless, the top-part of IT-dept of US as well as West is as nexused as India, and defunct. This mainly becuase at top-level, number of individuals are small, and well known in advance, and they have careers of several years during which they come into contacts with 100s of tax practioners. And these very senior officers deal with screening of large companies, whose executives are also well known in advance. So in US/West as well as India, nexuses emerge. But in US, since transparency is much higher, the damage these nexuses pay is much less.

How can citizens of India reduce corruption in income tax dept

Trivial.
  1. Steps 1-3: The citizens should force MLAs, MPs and District Panchayat Members to create procedures that would enable citizens to pass laws in District Panchayats, Assemblies and Parliament. Please read LM.01 to see the procedure using which citizens can pass laws in District Panchayats and City Councils. Please read LM.02 to see the procedure using which citizens can pass laws in Assembly. And please read LM.03 to see the procedure using which citizens can pass laws in Parliament.

  2. Step 3 : The citizens of India, using LM.03 should pass draft to enact procedure ID.01. To see the detail of ID.01, please click here. These procedure would create a tax-ID for every citizen.

  3. Step 4 : The citizens of India, using LM.01 should pass draft to enact procedure ID.01. To see the detail of ID.01, please click here. These procedure would create a tax-ID for every citizen.


    If you have any questions, please mail it to MehtaRahulC@yahoo.com. Thousand thanks in advance.