Should Governments Collect Donations in Addition to Taxes?

Soliciting funds from the public in an emergency betrays a government’s lack of planning and prevision for such events.
 It also reveals the fact that the taxes already collected have not been spent correctly.

During the COVID-19 emergency, the political and departmental authorities are making appeals and collecting donations to face the crisis. If by ‘donation’ we mean an individual voluntarily giving away a part of his wealth to a needy person, in a disinterested manner, then, there is an issue with the manner in which governments are collecting them. A government usually taxes its citizens and meets all its expenditure, both productive and unproductive, which are used to meet planned and non-planned expenditure. In all the newly independent and developing countries their political leadership wanted to become ‘welfare states’ with the obvious purpose of taking care of the total welfare of all the people in the country. Accordingly, most Parliaments authorise governments to set aside a fund for unforeseen circumstances, including natural or man-made disasters, in their annual budgets.

Here, we are going to discuss the ethics of raising funds by governments from the public, apart from taxation, while the ethics of spending public funds would be touched only indirectly. Soliciting extra manpower or associating civil society organisations for immediate relief and reconstruction is people’s participation and it is indispensable. But soliciting funds from the public in an emergency betrays a government’s lack of planning and prevision for such events. It also reveals the fact that the taxes already collected have not been spent correctly. Since the government is authorised to ‘beg or borrow’, it is doing both. Borrowing for unproductive purposes is increasing the debt burden and tax money is being used to repay it. In order to show themselves as a strong government, the political and administrative authorities want to do everything and regulate everybody thereby preventing citizens’ initiatives.

Trust Deficit

The government’s administrative staff is diverted during emergencies to technical or humanitarian tasks for which they are neither qualified nor trained. During emergencies, political leadership is not sufficient to take decisions and to implement them; it is to be supplemented by other social leaders, relevant to the issue. But, this has not happened during the COVID-19 health emergency. The health and medical infrastructures available locally in the society are kept at a distance, and the civil society organisations are just tolerated. They don’t trust the private sector and they don’t recognise the NGOs working in the field. Similarly, lakhs of migrant workers were blocked or dispersed, unsupported by their own employers. As a consequence, the governments are now spending lakhs of crores of public money to mitigate their suffering, and we never know, when they would rejoin productive activities. But, appeals are made for public contributions, but the expenditure is not transparent.

During emergencies, political leadership is not sufficient to take decisions and to implement them; it is to be supplemented by other social leaders, relevant to the issue.

1) The Indian constitution has authorised Parliament to set up a Contingency Fund on behalf of the President of India and it can be operated by executive action for disasters and related unforeseen expenditures in it was raised to Rs 500 crore is to be from the Consolidated Fund India and the amount should always to be full., the Contingency Fund of each State Government is established, though they vary state to state.

Further, looking back, we find that in addition to such contingency funds, the Prime Minister’s National Relief Fund, which was set up in 1948 to provide relief for the refugees from Pakistan, continues to function ever since. The states too have their own Chief Minister’s Relief Funds. Since 1985 the PM alone is spending it at his discretion and by 2009 there remained an unspent balance of Rs.3,800. The funds donated to it will not be counted as CSR funds and they should not be used to fund any regular government scheme.

Now, on 28th 2020, the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM CARES) is also set up to collect funds from the public, in spite of the fact that there already exists since 2005 a National Disaster Response Fund (NDRF), which was set up precisely for this kind of situations under the Disaster Management Act. Though the Act is invoked for the first time in March 2020 in the wake of COVID-19, the NDRF is not declared open for public contributions until July 2020. Contributions to PM CARES are tax-exempt and can be counted against a company’s CSR. It is also exempt from the Foreign Contributions (Regulation) Act, 2010. Although the Centre has been previously refusing foreign aid to deal with national disasters, it again started accepting it since the Kerala floods in 2018.

The recent fund is registered as a private trust in New Delhi and the PM, who is the ex-officio chairman. He is assisted by a staff member in his secretariat who, it is claimed is working voluntarily without remuneration. In addition to the ministers of Defence, Finance and Home as ex-officio members, three eminent persons in relevant fields can be nominated to the Board of Trustees, though. so far, this is not done. The website does not give more information and the PMO does not consider the Trust as the Public Authority, and hence it refuses to reveal any details when demanded by the public under the RTI Act. The present Trust has appointed an independent auditor. The Ministry of Commerce clarified that the contributions to the Chief Minister’s Relief Fund or any state relief fund will not qualify as CSR expenditure, while any donation to the PM CARES Fund will. However, donations to the State Disaster Management Authority to combat COVID-19 can be counted as CSR expenditure. The fund managers are refusing to reveal the amounts neither received nor spent.

2) Negative Consequences for the Social Sector:

There are, according to the Ministry of Statistics and Programme Implementation (MoSPI) about 36 lakh non-governmental organisations in the country, out of which nearly 80% are in the field actively fighting COVID 19. Everybody agreed that without this sector’s response, the situation would have been catastrophic. Yet, the governments are competing with this social sector, both in collecting funds from the public, as well as in its operations in the field.

There are adverse consequences of this soliciting of funds from the corporations and high-net-worth individuals by the governments, particularly during the COVID19 emergency. Most of the private sector companies have started contributing substantially to the government funds, abandoning their traditional partners. It is estimated that for the next two years, the private sector CSR funding for the non-profit sector which is attending to many vulnerable sections of the society, such as the elders, orphans, destitute, vulnerable women, slum areas, etc. would come down drastically and they may be forced to sharply reduce their activities. They have been, so far playing a significant role to help India reach its Sustainable Development Goals of the UN. Now meeting those targets is difficult. In any case, the profitability of many firms in the country would be less and also impact their contribution to CSR. As of now 20% of all philanthropy in India is from CSR funding. Even the projects that companies have undertaken so far might be affected. At least, the companies would not take up new projects. Though, in a recent judgment, the TS High Court, shocked by the plight of the senior citizens the old age homes, suggested the government should try to rope in the corporate sector to adopt them, it would be a difficult task.

Wither Transparency?

Hence, the questions that arise in this situation are, whether a government is justified in collecting funds in two different ways for the same kind of expenditure? Even if it does so, should not all the income and expenditure funded from the public contributions be scrutinized by the Comptroller and Auditor General of India and be accountable to the Parliament? Why should it not be transparent under the RTI Act? When Governments collect voluntary funds do they still remain voluntary? Would there be no quid pro quo of any sort? When does the government recognise the democratic right of citizens to participate in the governance, especially during the emergencies? The Western democracies give a large space for the civil society organisations to operate freely in many areas of social development without the bureaucracy intervening and the politicians being jealous.

3) A) In reality, when the state is intent upon collecting funds, such funds would not be genuinely voluntary, since they are collected by the people in power. For example, the contributions raised from the Defence staff during the months of March and April 2020 to fight against COVID-19, are directly deducted from their salaries, with the presumption that they have consented, when their top commander had spoken on their behalf.

Even the private sector Reliance group of companies, too have cut from the salaries of their employees and handed over a big cheque to the PM. In the Southern states, the officials of various departments have been excelling each other to reach out to the IT industry professional associations, industries and manufacturing companies that they regularly deal with, so as to arrange that the CEO personally hands over the cheque to the C.M. or the next most important minister.

B) Sometimes, the operation gives ‘zero net benefits. It is the case with the donations from the Public Sector Undertakings, like Oil India or the Railway Board which had a photo opportunity with the P.M. or other important minister, while they hand over a cheque for a substantial amount. The Railway Board, at the same time, made the forlorn migrant workers pay for their return journey. The Oil India charges the citizens for their products and services, while PSUs in losses receive, at the same time, grants from the annual budget.

During the Cold War, similar things had happened in the Communist bloc. When a government hosted an international event to express their international solidarity, it was declared that the event was funded by the voluntary donation of a day’s wages of the workers in the fields or in the factories. In a strictly planned and centralised economy, the funds spent on such events came from the same source, whether one called them voluntary or not.

C) Further, another anomaly is that these funds are collected from a citizen, sent to New Delhi or to the state capital, and from there they would be administered hierarchically by the governmental machinery so as to reach back to the languishing neighbour of the same citizen who donated. In this operation by an administrative mechanism, the human face disappears as the donor contributed to the state as a kind of obligation for being rich, and the beneficiary has received it from the government officers, as a matter of right since he is in difficulties.

D) Sometimes, the transaction may not be impartial since normal financial rules are not applied in the case of these funds. Party leaders might channel these funds in favour of party-followers since they are spent at the discretion of the political head, who has his allegiance to a political party.

E) The funds might be given away arbitrarily without any objective criteria. It is the case of ‘ex-gratia’ grants dispensed by the political authorities on a visit to a place where a tragic event takes place. When a person dies in an accident of fire, explosion or floods or riots, stirred by the emotional chord, the political personality visiting announces, on the spot, grants, house-sites, jobs to the kith and kin, etc. on behalf of the government. There is a stunning absence of any established criteria in fixing the compensation for the loss incurred, and the generosity seems to be modulated by emotional or even political factors. Same is the case with expressing appreciation for artists and sports persons for their achievements. The gifts offered are often unrelated to the cause to be promoted. like the accident, compensation or enrichment is also unpredictable.

The practice is anachronistic. As human civilisation advances, we must dispense with depending on the bountiful heart of a political representative in case of an adversity and, instead devise objective mechanisms of social protection by way of institutionalized, universal and generalised insurance policies for all risks and for all ages.

4) Our Constitutional Objective:

Fortunately, we have clear goalposts in our constitution i.e. to aspire to live in a secular, democratic and socialistic pattern of society. It implies not just a political democracy but also social democracy. It would signify that ultimately we should turn the present state-centered economy into the society-centered economy, where economic actors would function in their interest as well as in the interests of others. It is not wild privatisation, where an individual acts exclusively in his own best interest and enrichment. One enriches himself while enriching the society as well by the same action, but not separately.

As a first step, under the concept of the state capitalism, the state had taken over the reins of economic power from a few; to not only prevent exploitation of the many, but also for the growth and development of all. But, we have seen clearly and bitterly the limits of such a totalitarian economy, where the party apparatchiks, the bureaucrats and the political actors exercise power to dominate and control the economic actors. Here, there is a permanent struggle of political interests to usurp economic interests. The general welfare and collective interests are sacrificed in the process. Thus social economy is the liberal pragmatic version of communism, in which its proponent Karl Marx wanted to eliminate the shameful exploitation of weak labour force by the strong individual capitalist.

In view of the above analysis, the conclusion that we should arrive at is, the individual or company’s donations in cash or in kind, should be with a personal touch, from person to person, directly. The support should reach the neighbours, so as to share their sorrows and joys and to strengthen the feeling of living together among the receiver and the giver. The receiver would personally recognise the good-will of his neighbour and would be prompted to think in terms of returning this gesture in any other way and in any other time. For a wider and bigger cause and to reach other fellow human beings beyond the neighbourhood, there are many experienced and credible national and international civil society organisations, which can be approached. Such gestures of solidarity will multiply the expressions of goodwill, trust and affinity among human beings leading to more cordial mutual relations will be more cordial.                                              

Dr. Rao VBJ Chelikani


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