Bribes & KickbacksThe second argument used by critics and the government is that electoral bonds prevented money from sinking into the ‘black’ economy.While estimates vary, it is believed that 35-50% of India’s economy is ‘black’ or untaxed. Traditionally, smaller businesses and traders have kept two books – one for the tax authorities and another for themselves – to reduce tax outgo.In the political scenario, the so-called ‘black money’ plays an important role – as a means to send bribes and kickbacks from companies to political parties in exchange for illegal favors, such as rigging government tenders, making investigations go away and for watering down regulations.In fact, it is believed that most of the funds raised by political parties are illegitimate – consisting mostly of kickbacks and bribes from companies.Before electoral bonds, companies had no anonymous way to transfer these bribes and kickbacks to political parties from their declared incomes. If they sent such payments from their official bank accounts, media and watchdogs would try to make a connection between various favors – such as the award of a large railway contract or the dilution of a regulatory provision – and the ‘donation’.As such, they were forced to keep slush funds purely for the purposes of bribing political parties.Moreover, they were not the only ones grappling with the problem of storing and handling black money. Once the ‘black money’ is handed over by the companies to the parties, it becomes the headache of the parties.Thus, as far as bribes and kickbacks were concerned, the pre-electoral bonds era was fraught with dangers for both companies and parties.This is where government’s electoral bonds system truly shined. Once the bonds were introduced, the companies no longer had to maintain separate black funds for bribing and kickbacks, and could simply send the bribe money to the concerned party disguised as a donation.Similarly, the political party too did not have to maintain its funds in the black. Since the money has come from the company’s bank account as a donation, it could be declared in the assets of the party and managed easily. India’s largest political party, for example, had assets of Rs 893.25 crore in 2015-16, which — over the next six years — increased to Rs 6,046.81 crore in 2021-22 — the last year for which records are available.Arguing in the Supreme Court, the advocate representing the central government, Solicitor General Tushar Mehta, said the electoral bonds scheme had done much to curtail the use of black money.“Our case was that we want to curb the black money. A criminal may have paid the donation, but ultimately, the donation comes in the white economy, but we could not persuade your lordships,” Mehta pointed out, after the judges had pronounced their verdict.On the face of it, this looks like a plausible argument, after all, who would not want the ‘scourge’ of black money to go away. But this line of reasoning ignores the reason why black money exists. It exists because of two main reasons – to save tax, and to carry out criminal activities.As Mehta pointed out, allowing companies and individuals to use their official funds for everything — including sending questionable donations to political parties – can definitely bring down the use of black money. But, the question is, at what cost?For example, suppose a company could get a Rs 1000-crore construction contract by sending a ‘donation’ of Rs 100 crore to the party in power. If it is able to send this money using the anonymous bond route — with no risk of any ED or CBI inquiry — from its official accounts, there is a much higher chance that it would do so than if it had to use the cumbersome and illegal black money route.In other words, facilitating questionable transactions using banking channels can definitely bring down the use of black money, but it also risks making such transactions the norm, rather than the exception.It is worth noting that a recent analysis by TNIE found that nearly all of the top donors under the electoral bonds system were companies that depended heavily on government contracts to carry out their business, such as those in construction and mining.There have also been several reports that have pointed out that many companies transferred money through electoral bonds immediately after they were raided by agencies like the Enforcement Directorate and Income Tax Department.Hence, allowing companies and individuals to make secret payments to political parties for illegal activities from their official accounts will definitely reduce the use of black money, but it will have far greater consequences in the form of facilitating such criminal activities.In conclusion, therefore, it can be seen that neither of the two key arguments raised in favor of electoral bonds — protecting those who make donations to political parties from vindictive actions of the government, and curbing the use of black money — hold water on a close examination.The way to tackle the use of black money in criminal proceedings is not to facilitate criminals to use anonymous donations to transfer funds, but to heighten the surveillance of black money to track down the criminals.
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