People are seen lining up outside the State Bank of India, Dimapur Main Branch to exchange their money near East Police Station Dimapur on November 12, 2016 in this Morung File photo. The scene was same everywhere across the state. Photos taken on the same day depicts the scenario in the Corporation Bank, Dimapur Branch as well as another SBI Branch in the City. . (Morung file Photo)
Nagaland: A tax haven at times, insecurity at others
Morung Express News
Dimapur | November 8
On November 22, 2016, soon after the demonetisation of Rs. 500 and Rs. 1000 notes in the Indian Union, a chartered flight landed in Nagaland’s commercial capital, Dimapur. The Central Industrial Security Forces, that guard the Dimapur Airport, took hold of its two important passengers—a non Naga businessperson and cash worth Rs. 3.5 crore in demonetised notes. The cash was claimed by a famous Naga businessperson who came under the Income Tax spotlight—not for evading tax himself, given his Scheduled Tribe status, but for allegedly helping convert mainland businesses’ black money to white.
“The IT department froze several bank accounts of the Naga businessperson and the case is still under investigation,” informed an official source on the current status of the case.
The businessperson comes from a family of politicians, and not the kind who lose elections.
Black money in Nagaland is often a result of siphoning off “development funds”—large businesses have cropped out of initial capital from these funds. With tax exemptions, much of this can be stashed away in bank accounts. Unless someone is looking for the money and linking it to corrupt practices, there is no ceiling to how much money can be stored in this tax haven.
Yet, a politician donated a few thousand rupees while appearing as chief guest at a local program, all in old demonetised notes. Others held back.
“We were expecting much more but got only Rs. 10,000,” said a morose students’ body that had invited a politician as its chief guest to its program, post demonetisation, expecting up to a lakh in donation, as was the regular practice till November 8, 2016.
According to KG, a businessperson in Dimapur, demonetisation took such hoarded cash away from private players who had started playing “mafia” roles. Or, in the case of Nagaland, buying political loyalty. “Prices inflated and elections suffered because they dictated the market through money power and syndicates,” said KG, however acknowledging that those who have black earnings (income obtained illegally or not declared to evade tax) do not always store them in cash.
But for those who do, land and gold became a preferred way of converting black to white—to facilitate this, middlepersons were offered up to 20% in commissions. The wealthy, also struck by panic, channelized their money through multiple current accounts, Self Help Groups and Non Government Organisations. Bullion and insurance played their part.
KG, meanwhile, is optimistic. “Now this money has been pooled into the economy for the welfare of the common people,” KG believed, hoping that “the economy will pick up in the next two years.” Pro-poor policies—roads, electricity, schools—may one day become a reality.
But the reality, post demonetisation, for small businesses even in the urban sector remained bleak.
Small vendors and rickshaw drivers, for instance, were badly affected. RO, an activist attempting to organize the unorganized, has been interviewing some of them in Dimapur every month since November 2016.
“First of all, vendors who sell small local produce in markets, mostly women, live hand-to-mouth. They are either single or have alcoholic husbands, which means they had no one to queue up for them to exchange their old cash,” explained RO of their condition post demonetisation. Besides, being small money holders, “they were regularly mistreated at banks.”
Once past that hurdle, “people started giving Rs. 2000 notes while buying Rs. 10-20 worth of leaves or veggies.” Business suffered—in rural areas, they gave items away on credit, but in urban areas this was not an option. “I went around the market the whole day to buy a kilo of tomatoes but failed as all the vendors refused to take my old Rs 500,” said Nochet, a home based worker. For those who depend on these businesses for per day wages, these losses were irreparable.
“People were unable to hire vehicles to bring their produce to the markets due to the cash crunch,” said RO. However unfair, people trudged on.
While much of the strife of those days is past, “rumours are rife till date,” observed KB, another Dimapur based activist and entrepreneur.
Like him, many people found old notes tucked away in a cupboard, a folder or in a bamboo basket. In a nonexistent economy, with nonexistent prospects, this loss could mean a life’s savings, as recounted in Part I.
“People are scared to spend now unless necessary as they think their money may vanish again. There is no confidence in the erratic policy making of the government,” said KB. But if the policies are seen to clip the wings of the corrupt, and bottle corruption in the long run, people could change their minds, observed KB.
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