Voodoo economics: Don't illegalise the bribe, tax it!

Many years ago, more years than I care to remember, I was posted as a probationer under district training in Mandi district of Himachal. On two days every week, I had to sit with the deputy commissioner (DC) in his court when he heard grievances and received petitions from the public. The purpose was to give me an idea of the issues which concerned the public and how to deal with them on a one to one basis.

One day, a distraught PWD (public works department) contractor presented himself before the DC and wanted to know what the officially approved rate for a bribe was in the department! He explained that he could not balance his budget for various works with any predictability as different officers wanted different amounts as bribes. He requested the DC to give him a copy of the GO (government order) in which the rates were specified. The DC assured the poor chap that he would try to get the order, but in the interim, he should not pay any bribe to anyone.

That was 50 years ago, and nothing has changed during this period, it would appear, except that now the rates have gone up manifold under the effect of demonetisation, GST, digitisation of all transactions and PayTM.

It is an axiom of the financial underworld that the more difficult governments make the process of bribery, the higher the rates. Especially if most of this undeclared wealth is sucked out of the system by one entity through sophisticated and sovereign instruments like electoral bonds and PM Cares!

Who says there's no transparency in this government? Last year, local papers published an alleged rate list of the prevailing baksheesh in one of the police stations of a western Uttar Pradesh district. Now, this is exactly what that supplicant in Mandi wanted, as an important element of ease of doing business.

In another reported case in our most progressive state, this year itself, the peon or chaprasi of a naib tehsildar wrote a letter to the district magistrate complaining that he was not being given his fair share of the bribes received in that office!

He stated that it was his job to extract/collect the bribes, for which the going rate for peons was Rs 1,000 per day, but he was being paid only Rs 500. He also demanded that the going rate should be enhanced to keep pace with inflation. Both legitimate grievances, to my mind, when even the finance minister cannot afford to eat onions. (Predictably, the said minion denied that he had written such a letter).

Just last week, the press was agog with reports that some thieves had stolen Rs 65 crore from the house of a retired but still powerful IAS officer from UP in a north Indian hill station. Now, that is the quantum of alleged bribes which brought down Rajiv Gandhi's government, but it is a sign of the Ram Rajya times that it cannot now lay low even a bureaucrat.

The officer has not filed any police complaint — he's not stupid, see, that's why he got into the IAS. But efforts are reportedly being made behind the scenes to get his hard-earned money back; I would not be surprised if Mossad is roped in to do the job, once they have finished off killing what remains of the Hezbollah leadership, that is.

Bribery — both the giving and taking — is inbuilt into our DNA, even before we evolved from the apes. As definitive proof, one just has to go to the monkey infested Jakhoo temple in Shimla. Nine out of ten visitors there will have their handbag or phone snatched by a monkey: the ape will promptly climb a tree and will return your item only after you have proffered a bribe of a banana or orange (these days, they insist on hamburgers or pizza slices.) So bribery is nothing to be ashamed of — it is an inherited evolutionary trait, like stupidity and the urge to beat up wives.

Which is why I strongly believe that the government should stop fighting it and legitimise it. Economists, as usual, cannot agree on whether corruption is good or bad for a country's economy.

One group maintains that it lowers GDP growth rates by discouraging foreign and even domestic investments. The other lot differs — it opines that in a heavily regulated and policed economy (like India), corruption should be viewed as "virtuous bribery" — it acts as a deregulation instrument, greases the wheels of the economy, cuts red tape, promotes quick decision making.

A third lot feels that there is something like a Laffer's curve in corruption, i.e. bribery is good for the economy up to a certain point, but beyond that it becomes extortion and its benefits to the economy start declining. The jury is still out on this, just like it is in the bail applications of Umar Khalid.

I tend to go with the second lot, having observed the phenomenon at close quarters (sometimes too close!) for 35 years. In our country, without this grease, nothing would ever get done — no roads, no bridges, no recruitments, no projects, no welfare schemes. So (and I'm applying for a patent for this idea), why should the government not get a slice of this virtuous pie?

According to Prof. Bibek Debroy and Laveesh Bhandari in their seminal book, Corruption in India: the DNA and RNA, the total quantum of bribery in India could add up to 1.26 per cent of India's GDP, and at current levels,  would be US $300 billion.

My suggestion, arrived at after much burning of the single malt, is that the government should make bribery legal and impose GST on it. The GST rate would, of course, have to be 28 per cent since bribery is a 'sin goods'. This would net the exchequer almost $90 billion per annum! More than enough to pay for the PM's planes, cars, foreign peregrinations, self-publicity, Central Vistas, statues and even the dreaded MSP. A win-win if ever there was one.

The collateral benefits would also be welcome — winding up of the Enforcement Directorate, downsizing the Election Commission and CBI, a full stop to arresting opposition chief ministers, etc. And do spare a thought for that poor IAS chap deprived of his hard-earned 65 crore — he will finally be able to lodge an FIR — after paying a bribe, of course.

Views are personal

Avay Shukla is a retired IAS officer and the author of Disappearing Democracy: Dismantling of a Nation and other works. He blogs at avayshukla.blogspot.com