Aadhaar Over-Reach: Making It A Must For PAN Will Leave Millions Vulnerable

The Finance Ministry’s decision to make Aadhaar, the unique biometric identity issued to over a billion residents of India, compulsory for filing returns is a dangerous move. It will convert what was originally intended to give the poor an ID, and the government an efficient way to target benefits and weed out fake beneficiaries, into a financial Frankenstein.

The ostensible reason for making Aadhaar mandatory for issuing PAN numbers and filing income-tax returns is that there are too many people with multiple PAN numbers, which makes detection of evasion difficult. But this is tosh. It speaks more about the incompetence of the state and its tax officials than about a real need for linking Aadhaar to PAN.

It can be argued that every country has some form of national identification process. The US has its social security number, and so India can well have its Aadhaar. But the difference is this: there is simply no privacy protection in the Indian system that is legally strong enough to deliver justice to people whose IDs have been misused or compromised by the state or even private parties.

India’s is a weak state, and the legal system is crumbling under the weight of corruption and inefficiency. When serious crimes involving rape and violence can drag on for decades, who will believe that the judiciary will somehow fast-track cases of ID misuse, theft or compromises on privacy.

Exhibit A to prove the above point is the Niira Radia case. The unauthorised disclosure of the Radia tapes may have had the beneficial effect of throwing the spotlight on corporate lobbyists and their links to powerful journalists, but thus far it has not delivered justice to even one of the individuals whose privacy was compromised (including Ratan Tata). It is also worth noting that the authorisation for tapping Radia’s phones was given by the Home Ministry to the taxman, and the leaks could not but be related to someone with access to these taped conversations. How can anyone trust the taxman with such information in future?

Once Aadhaar becomes mandatory, despite the fig leaf of privacy security provided to taxpayers by law, one cannot but fear that information can indeed get into the wrong hands.

Consider how this can wreak havoc.

In order to detect duplicate PANs, the taxman will be authorised to use Aadhaar linkages to ferret out multiple PANs, assuming those with multiple PANs do indeed link some of them to Aadhaar. This information will presumably be available to the taxman, who has two choices: go after the violator as per the law, or work in tandem with the crook to get him off the hook or a light fine. In other words, it may boost some forms of corruption. Didn’t bank and tax officials not do the same when demonetisation forced black money holders to clandestinely exchanges their old notes for new, and by opening multiple accounts in banks, or using benami Jan Dhan accounts? Bankers were at the forefront of telling crooks how to launder money; the taxman will do the same when he gets hold of information on millions of multiple PAN holders.

It is wrong in principle to empower the taxman to launch fishing expeditions on PAN data linked to Aadhaar. Far from using the system to detect suspected wrongdoing by specific individuals or companies, the system may be used to figure out a vast list of probable candidates for sending notices to – leading to avoidable hardships to millions of marginal deviants or even innocents. The right way is to first detect a possible tax evader by normal means, and then use technology and surveillance to establish proof.

This is not to suggest that the taxman must learn to live with multiple benami PANs. The answer is to use technology to prevent the creation of duplicate accounts by making the PAN issuance process itself more foolproof. Right now, PAN cards are easily replicable, and most photographs are so poor in quality that they may often bear no resemblance to the holder.

It is not even my case that Aadhaar must have no role to play in the detection of tax evasion. But let’s put first things first: this should happen only when the ordinary citizen can be guaranteed full privacy protection, and quick justice when breaches occur.

That, unfortunately, is far away. Till we find a way to ensure speedy justice on privacy issues, it is better to let a few evaders go unpunished than to try and punish the whole country.

One option is for the government to incentivise the proposal, by, for example, offering taxpayers a one-time, 1 per cent income tax rebate in return for seeding Aadhaar into the tax database. The honest ones may well do this. It does not mean those who don’t do it are dishonest. It only means they don’t trust the state. Till this mistrust is bridged by sensible privacy protection, Aadhaar must remain purely voluntary for those who do not receive direct state subsidies.