The Good, Bad and the Ugly!

Your company could be good, bad or ugly depending on how you manage it.

Everyone in this world makes mistakes. I am yet to see someone who has never committed a mistake. So is the case with the companies too.

Every company makes mistakes. But the difference between the good, the bad and the ugly is that what they learn out of the mistakes.

The Ugly company

When the mistake back fires and losses are sustained, a few companies would try to explain away why these are not important. They try their best to hide the mistake. And then, later try to make up with an excuse that could have the remotest possibility of occurring.

Then, they try to give explanations to convince why this mistake is not really a mistake. Why people who made these mistakes did it in good faith and that they need not be taken to task? And why people who spotted these mistakes and tried to correct it are enemies of the company!

In more than one company, such good Samaritans who had the guts to stand up and say that a mistake has occurred, are often thrown out or into the jails.

One cannot accept a mistake! A mistake is to be hidden in an Ugly Company.

The Bad Company

In the bad company, when a mistake is identified, the person who spotted the mistake is showered praises. And the person who committed it is crucified in the altar.

The reasoning is lost. The error is identified. The person who committed the error is incarcerated and punished for the error he committed. The company justifies the action it has taken and continues on its course. May be, another year or two down the line a similar or a larger mistake is committed by another person in the company!

The Good Company

When a mistake is committed and identified, a professional company would look at how to set right the current scenario for one. Second, it will also find out what are the lessons learnt and how to ensure that this does not occur again in the company.

It is not only to spot the error after its occurrence that is important. The recurrence of the same error again should also be stopped. Only then, the company is a good company and a growing company. We talk of lessons learnt exercise every time a new change occurs.

If it is true for a small organization like a company, what is true for a large Government where errors are as common as mosquitoes in India?

An overdose of Corruption

While we are being fed with an overdose of corruption every day, the mistake mongering people talk of who made the error. How much he or she gained out of it? And what is the presumptive loss to the government because of this error?

Now, could you find anyone in the opposition or in the government talk of a permanent cure to the disease? Is there a single step that the government is suggesting to rectify the string of corruption that is being faced by the public? No, not even a single solution has been put forward by any of the top leaders of either of the parties! They do not even make an attempt to correct the cause of the problem.

Why no solutions?

Even if you suggest a solution, none of the people on the top or in the hierarchy will accept a solution or even have a mind to listen to them. Simply because, most of these people think that corruption is part and parcel of the system. It is like what one of the great saints of Tamil Nadu sang, ‘when people want to kill the tortoise, they put it in water and heat the water. When the water gets warm, the tortoise enjoys it and plays in it. We are as clouded as that tortoise by our delusions’.

We do not realise that one day, this would kill us! Only the good companies grow; neither the bad nor the ugly do!

Money and Governance

Introduction

Today, there is no paper or forum that is not discussing corruption at all levels of Governance. It is rather becoming stale with people having come to accept corruption as a part of the exercise that we call Governance. When as an Engineer Trainee I was working under Padmashri Prof P K Kau, he used to say, unless one understands how and what created imbalance, one can never find a solution. Of course, Dr Kau was referring to our Toroidal container for the fusion reactor that we were trying to build, in those days. His doctrine of understanding the cause – effect relationships is primordial in solving any problem that one faces in daily life.

Have we understood what causes corruption? Or is corruption the cause or the effect of something else? Is there a scientific study undertaken by our social scientists to know the underlying causes and therefore, the effects that it has on our society? What will be India like ten years hence if this is the status of social living?

I did some analysis myself though not a social scientist. My interest, as my article also clarifies later, is driven more by selfishness; I am selfish for the well being of my own self and my descendents. Here it is.

What drives Governance?

Money and fame drives governance. 

Why would anyone want to be at the top of the political hierarchy? If your answer is to serve the people, please note you are lying your heart away.

About five years back, I was in a meeting with one of the Vice Chancellors of a University in Tamil Nadu. There was an inquiry and I was there with the VC, Director of Distance Education and one of the Trusts that ran a Study Centre in Chennai. One of the questions fired by the Director of Distance Education was, ‘Are you running this study centre with profit in mind?’ The Study Centre person promptly answered, ‘No. We are running it to serve the students and the people’.

How many of us would believe this? Do you think the VC or the Director, DE, believed it or for that matter do you think the person who uttered it, believed in it? I doubt it. I was about to say, ‘Are you running the University for profit or for Service of the people?’ I refrained myself since I was there to get our long standing dues from the University as a Study Centre and did not want to jeopardise it in any way.

So when people come to ‘power’ their intention is to get money and to get fame. Let us not cheat ourselves by saying they come there for serving the poor and for uplifting the livelihood of the millions! Please read Parkinson’s laws on human life cycle and the age old Maslow’s Need Hierarchy. Any constitution that is designed without factoring in Selfishness of human being will fail. And that is what is happening in our country.

So it is right to expect people to get corrupt. You have a system that breeds the virus and naturally, it thrives!

The Art of Controlling Corruption

One of the main reasons for corruption is money; money in the government. More the money in the government, more the corruption will be. Naturally, the amount of corruption you had in the early days of our independence was low compared to what you have today; simply because, you just did not have this kind of money in the government.

There is more money to spend in the government in the order of lakhs of crores of rupees and the corruption is also at that level. Earlier you had crores of rupees and you had corruption in crores. For those people, who thought there was no corruption scandals in the early days of independence, please read about the Jeep Scandal 1948, Mudgal Case 1951, Mundra Deals 1956 and so on and on. The difference was only in the size. There does not seem to be any difference in the mentality of the people. 

In 1939, Gandhiji wrote,  "I would go to the length of giving the whole congress a decent burial, rather than put up with the corruption that is rampant." This was about the Congress Governments ruling in the states after 1937 elections. Corruption is certainly not new to India. If at all it does anything, it shows the uniformity of the issue across decades.

If you want to control corruption, you need to reduce money in the government. How do you reduce money in the government? Reduce taxes of course!

Made by the Government

Most of the issues today are man-made. Be it global warming or poverty, these are created and nurtured by human misbehaviour. If I were to say poverty in Africa is created by the rich west, how many of us will accept it? But close analysis will reveal the truth of the situation. 

So it is in the case of many of the ailments that this country, India, suffers from. Be it unbridled corruption or rampaging black money, they are invariably created and nurtured by the Government. I am not making a wild statement. Let me prove it.

Let us take the case of Black Money. A conservative estimate fixes the size of the Black Money at or about one and a half times the nation’s GDP. To know what or how it got created, let us answer first the question what is Black Money? Anything that is not brought into the book of accounts is Black in colour. Or in other words, all of them for which the taxes are not paid to the government become Black Money.

Black Money exists as long as Taxes exist in an unacceptable form. If you and I pay our taxes without remorse then that implies the taxation regime is acceptable. If we pay because someone is holding a dagger over our head, then it is not a democratic tax payment. It is an extortion promoted by the government. Which category do you consider is our taxation regime? How many of us will be paying taxes if government should stop extortion?

Mass disobedience to taxation and connivance of the government servants to ensure that legitimacy is upheld by avoiding tax; all these point to the unacceptable nature of the taxation regime. 

So who creates Black Money? Is it the people or the Government? By creating a tax regime that is unacceptable, the Government creates, pampers and nurtures Black money! And therefore, it is the responsibility of the government to destroy what it created. They can do so only by making taxation regimes come within acceptable limits.

Governance and Control

Governing people is a different game. It is not a police regime that you are conducting. You are a party to the democratic norms. The control needs to be mild and appropriate. Force is certainly not an accepted control norm in a democratic set up.

As a matter of fact, it is not about ‘governing people’; it is about ‘serving people’. 

May be a smaller and more easily understandable alternate will be an apartment complex. The secretary of the association might be an elected or nominated head of the association but he acts in line with the thoughts of the members. He is not a Ruler of the association. He is under the direction of the association members! He ‘serves’ the association and not ‘rules’ the association.

Whereas in most of the democracies across the world the order is different! The top man is considered the Ruler; the party is a ruling party; Government Executives who are called ‘public servants’ act as the ‘public masters’! They are pampered; they are ‘sir’-ed and they behave as if the citizens are ‘subjects’ to their rule. In reality, it is the citizens who ensure that the public servants and the political bosses get their daily bread.

What is the job of the government? Is it to control people and to subjugate them that we have created this government?

Corruption is an Effect

To close, let us draw our inferences. Corruption is a by product of the large scale money in the government and the unbridled power that we have given our executives and the government, in turn. Corruption is not a cause. It is an effect. Corruption will continue to exist and grow if the cause of corruption is not rooted out. To weed out corruption, we need to reduce money in the government; we need to reduce the power we have given the government. Neither of them is going to be easy! In other words, the end of corruption is not in sight!

Justice Denied

One more of those not so thoughtful words from our top judicial executive!

He calls a class of women ‘keeps’. Good Lord! Women are not as voiceless as the puny backward classes of the country. They can raise noise. No doubt! But still he has not smirched even a bit. He continues to lead his life of isolated comfort as he did earlier.

Once when the Nobel Laureate, Mr… said, ‘once a person gets a Nobel, people think that he has an answer to everything in the world. They think he knows sociology, history and geography as much physics and chemistry’. It is the vice-versa with most of our Judicial and top administrative folks.

Nobody thinks they know anything about any subject including their own law. That possibly is the reason why they need a lawyer to help them point out what law is in every case. Else why do we employ two lawyers for every case; Judges can look up the case and provide judgment according to the law of the land. Where is the need for the lawyer to plead?

But, they themselves think, that they knew everything about everything. Be it, Solar Energy or Astronomical sciences, they will have an answer to everything.

They want to be the chairmen of Electricity boards and plan for the country’s future power sources. They head the film societies and decide what our children should see at the end of the week. They are the arm chair judges and pass judgments even before the judge decides what the issue is. So is the case with our judiciary too!

They never seem to realize that the world around them is not built by one man. It is a society of many diversified knowledge. It is this society that is supporting him too! He is being paid not for what he is inventing or manufacturing or servicing but for the order he is helping people to maintain. It is also a service to the public.

Is ‘keep’ a good word? Fit to be mentioned in public registered document such as a Supreme Court judgment?  Who would sit judging this?

Our judges know everything in this world. They can talk of history of caste systems and certify for the public consumption that Caste system is for the good of India. They can sit on judgments concerning women and call those who fall in love beyond the wall of marriage as ‘keep’. They may do so when their daughters do that.

Is the Chief Vigilance Commissioner beyond doubt?

“Corruption has even been seen as an integral part of government activities sometimes specifically devised to extract higher bribes” – Azam, Gauthier, Goyette, 2004.

Vigilance has been a method to control corruption long instituted in India. In Technology parlance, we talk of, control systems with feedback and without feedback. One of the prime things that we all learn during our Engineering program is, to control anything you should know how to measure it. It is said, ‘if you know how to measure it, then you know how to control it too’.

Question Number 1: Has the vigilance department come up with any specific measuring methodology to control corruption in its life time of more than 60 years?

Question Number 2: What was the feedback that the Vigilance department sends to the government about increase / decrease of corruption in the country?

Hardly ten days back, I had the opportunity to talk to a senior government official about how do they measure corruption in the government. He just laughed and brushed it aside saying such things can never be measured.

Really?

A farmer when he wants to control sheep, he uses a sheep-dog to do the job. It is a known fact that you cannot have one of the sheep to be a controlling sheep. To my knowledge, one can never have the same group control. For instance, you want to control drivers you can think of having police to do the job. Politicians are checked by the people once in five years, at least. When you want to have someone to control the ruling party, you have the opposition.

Question Number 3: Why, then, to control and monitor administrators of this government we have the same set of people posted as vigilance officers every where?

It is rather dumb that when we need to complain against a tax collecting officer, you need to complain to another tax collecting officer. The vigilance officer was also a superintendent at the tax office before and possibly the person you are complaining against will come to the post next!

Now, let us come to the question of Chief Vigilance Commissioner.

First point is: it is rather dumb of our governance system to post an IAS / IPS or for that matter any one from the administration service to the post of a CVC. How can this person take firm action against his own friends and peers? For one minute, let us assume that this person is a blemish less individual. Still how do you expect him to do justice to the person who is complaining? No wonder Vigilance department is a waste of public exchequer. No good ever comes out of it for the people except for the politically minded individuals in the administration who play dirty games between themselves.

Second point is: All over the world, Vigilance officers are elected from and by the people and not nominated from the Government Administrators. This is so because; it does not make sense to have a control mechanism on government administrators using government administrators. Therefore, it is almost always a nominee from the people or an elected representative who sits in the position of Chief Vigilance Officer or equivalent all over the well administered world. 

I think the question whether the CVC can sit in his current posting or not was well answered by the Attorney General without mincing his words. He was quite right in saying that all other positions including judiciary will come under scrutiny if we start scrutinising that of CVC. How true!

The real question is not whether CVC can sit in that position or not but whether we should have another of those administrators sitting in that position to help us control corruption or not?

References:

Azam, Gauthier and Goyette (2004) “The Effect of Fiscal Policy and Corruption Control Mechanisms on Firm Growth and Social Welfare: Theory and Evidence  “  seen at: http://www.csae.ox.ac.uk/conferences/2004-GPRAHDIA/papers/4m-AzamGauthier-CSAE2004.pdf

A Case to abolish Income Tax

Introduction

After the 2001 resolution of the World Tax Payers Union to get the governments abolish Income Tax and instead charge the same on any of the consumption taxes, many countries have subscribed to the view. As many as 26 countries have accepted to a flat income tax rate as a precursor to removal of the income tax. India is yet to accept even some of the basic reasons behind the actions of the other countries.

Income Tax is a negative tax in contrast to many of the other positive taxes. Income tax has been and will continue to be a deterrent for growth in any growing economy. Let us see how.

Income tax is a negative tax

Taxes have social impact. When we look at any of the taxes we need to look at what is the impact it would have on the social, economic and on the personal front.

Let us take customs duty. It is largely used by countries to deter imports and to ensure that their own industry does not suffer. Excise duties also came in to create a level playing field to every player in the market. There were also reasons such as consumption deterrents. For instance, beer tax in most countries and a large excise duty in India is a deterrent to producers and buyers of alcohol. So is the case with tobacco too.

What is the purpose of Income tax? Instead of creating a positive impact on the society it produces a negative impact. Take the case of a person who is working hard to generate more income to him. The person has to end up paying more tax as well. His hard work generates more money as income to him and he is taxed more. In other words, the government is telling him if you work hard you will have to part with more. An obvious negative connotation!

Income Tax in India

Income Tax in India has the ominous distinction of being the one that created the largest Black Money market in the world. Almost one and half times our GDP is in the black money market and is not brought into the books directly. The Government of India can certainly find a place in the Guinness records if there is a record for creating the largest Black money market!

An unacceptable level of income tax has led to the alienation of the working and the business class alike. It is not that one likes it and the other does not. Neither of them sees any fruitful use of the taxation regime introduced in the name of Income Tax. Unless there is a convincing reason for payment of Income tax, India will only see the growth of black money market in the future rather than a decrease in it. To make matters worse, there is absolutely no place coming out from the Government of India in the last two years to counter the menace of growing alternate economy.

Alternate to Income Tax

I could not see any rationale behind why there should be income tax. If there is any valid reason, I wish someone could enlighten me on it. But if mobilisation of the money for the government is the only reason, then they can do so using any of the consumption taxes. Consumption taxes, on the contrary, have the advantage of deterring usage of unfriendly and unsafe material and to encourage those that would be good for the environment and for the nation as a whole. I did a simple calculation and found that by just increasing the VAT by 2%, the government could the same amount of revenue that they are getting from the Income Tax. And to make things easier, the same sales tax department could collect the dues and the expenses incurred for the Income tax department which amounts to about INR 10,000 Crores can also be saved. The members of the department could be employed in more rewarding positions in the government.

Conclusion

Income Tax as it stands today has the following negatives:

1.       Does not encourage people to work harder. It continues to be a deterrent for people who earn more. Therefore, it encourages, abuts and promotes unaccounted money.

2.       There is hardly any contribution to the country that Income tax can claim credit to.

If the Income tax is abolished and in its place an additional charge on any of the consumption tax is laid out, then the country stands to gain the following:

1.       Harassment in the name of Income Tax Collection is stopped.

2.       The Black Money market is killed over night. There is no more black money everything is natural! More money in the market place, more open spending. Therefore, more sales tax, service tax and duty collections are possible. The GDP would easily double within a year.

3.       By loading the income tax on to consumption tax there would not be any decrease in the tax collections at all. It would only increase.

4.       Deleting the department would save a huge revenue outgo to the government.