If the government wants to succeed, the security of the Aadhaar database must be ensured
Narendra Modi government has just widened the arc of its campaign against black money and parallel cash economy. Unfortunately this obsession with black money is not giving handsome dividends — IDs came with trumped up numbers, the overseas amnesty scheme was a flop show and the most recent declaration scheme resulted in unearthing just Rs 5,000 crore. Against this Indonesia announced a domestic and overseas amnesty programme and this paid in spades because at 4 per cent penalty, $349 billion windfall came in. The real reason for demonetisation is still to be divulged and its benefits unknown.
However, we continue to push the envelope on Aadhaar where privacy issues remain unresolved. We have made Aadhaar mandatory for opening of a bank account as well as for investments and cash transactions beyond Rs 50,000. Even the existing account holders will have to link their accounts with the Aadhaar by the year-end. This will not only eliminate benami bank accounts but also streamline the personal investment accounts held by individuals across their financial portfolio, including mutual funds, fixed deposits and insurance policies, most of which are used as investment avenues. The honest taxpayer is always compliant, it is the dodger and evader who refuses to come to heel finding ingenious ways to stay out of the net. Further, integrating the Aadhaar-linked bank accounts with personal account number (PAN) will allow the income tax authorities to capture all the income hitherto either unreported or under-reported by individuals across the country.
The way bogus ration cards, rural job guarantee payments and cooking gas connections were weeded out through a nationwide drive, linkage between bank accounts, PAN and Aadhaar will have a similar large-scale impact on those avoiding taxes. The measure is a logical extension of the government’s crackdown on black money with several individuals, companies and businesses depositing their cash in banks to legitimise these funds. Finance minister Arun Jaitley had time and again warned that having money in banks will not bring legitimacy to these funds.
By making cash transactions stringent in millions of accounts opened under pradhan mantri jan dhan yojana, along with stipulations for know your customer (KYC) norms, the government seems to have blocked yet another route to launder money by companies, individuals and businesses. The Amendment to Prevention of Money Laundering (Maintenance of Records) Rules, 2005 will make the siphoning off money across accounts virtually impossible. Hitherto PMLA Rules were required to only quote the PAN to open bank accounts or undertake high value transactions. Despite all these measures the war on black stash is not being won due to prohibitive penalties for amnesty scheme. Evasion has become a way of life in India. In fact, post-demonetisation, these very accounts were used by tax evaders to deposit their huge cash stash. By bringing in the core banking solutions norms, several cooperative banks will not be able to open the jan dhan yojana accounts. In fact, many cooperative banks branches were used by tax evaders and terror funding organisations to deposit cash in huge quantities. This had forced RBI to bar the cooperative banks from exchanging new currency for old notes in Rs 500 and Rs 1,000 denominations.
Government’s latest decision has come in the wake of Supreme Court ruling allowing linkage between Aadhaar, PAN and income tax returns though the issues relating to privacy continue to bog the measures unleashed by centre. Finance ministry directive effectively puts all banking and investment transactions to biometric and iris verification given the data held by UIDAI.
As a logical extension, perhaps the Aadhaar platform may become the de-facto citizenship card to avail services ranging from air, railway travel to getting access to government and private health services given the spread of life and non-life insurance coverage. For this major streamlining is required and Aadhaar itself needs to be error free. As argued in these columns before, unless the security of the Aadhaar database is ensured, the entire exercise may end up in futility. Similarly, the Supreme Court’s constitutional bench headed by chief justice Jagdish Singh Kehr will have to take a call on privacy issues.