Grave implications of World Bank Group’s financial surveillance program merit attention
Linguistic corruption committed for making private company with ‘public purpose’
September 21, 2013, New Delhi: In a startling revelation it has come to light that in an unprecedented move country’s most sensitive financial data -entire tax data of Indians has been turned over to a private firm, set up as a special purpose vehicle (SPV) named Goods and Services Tax Network (GSTN), an IT company on the recommendations of Nandana Nilekani headed panel. Legislators, informed citizens and institutions must act to stop the takeover of Government’s sovereign function of tax collection by a private company. GSTN is supposed to provide information technology support under the proposed Goods and Services Tax (GST). There is no provision for data security in it.
GST is a value-added tax which is expected to replace all indirect taxes on goods and services imposed by the Centre and Indian states. GST will replace the State VAT, Central Excise, Service Tax and a few other indirect taxes will be a broad-based, single, comprehensive tax levied on goods and services. It will be levied at every stage of the production-distribution chain by giving the benefit of Input Tax Credit (ITC) of the tax remitted at previous stages. GST is based on a destination-based taxation system, where tax is levied on final consumption. It is expected to broaden the tax base, foster a common market across the country, reduce compliance costs, and promote exports. The GST will be a dual tax with levy by both Central and State tax administrations on the same base. The GST demands a well-designed and robust IT system for realizing its potential in reforming indirect taxation in India. The IT system for GST would be a unique project, which will integrate the Central and State tax administration.
It may recalled that while presenting the Union Budget in 2011-12, the then Union Finance Minister Pranab Mukherjee informed the Lok Sabha that Technology Advisory Group for Unique Projects (TAGUP) headed by Nandan Nilekani, Chairman, Unique Identification Authority of India (UDAI) has submitted its report dated January 31, 2011 and its recommendations have been accepted in principle. Other members of the TAG UP included C. B. Bhave Chairman, SEBIR, Chandrasekhar, Secretary, Department of Telecommunications, Dhirendra Swarup, Former Chairman, PFRDAS. S. Khan Former Member, CBDTP. R. V. Ramanan Former Member, CBEC and Dr. Nachiket Mor Chairman, IFMR Trust.
This was a follow up of what the Union Finance Minister had said in his Budget Speech of 2010–2011 with regard to the setting up of TAG UP. Para 104 of the Budget speech reads:
“An effective tax administration and financial governance system calls for creation of IT projects which are reliable, secure and efficient. IT projects like Tax Information Network, New Pension Scheme, National Treasury Management Agency, Expenditure Information Network, Goods and Service Tax, are in different stages of roll out. To look into various technological and systemic issues, I propose to set up a Technology Advisory Group for Unique Projects under the Chairmanship of Shri Nandan Nilekani.”
The TAGUP report states, “In recent years, Government functioning in general and specific projects in particular have come to involve complex Information Technology (IT) system development. Five projects stand out:
1. Goods and Services Tax (GST)
2. Tax Information Network (TIN)
3. Expenditure Information Network (EIN)
4. National Treasury Management Agency (NTMA)
5. New Pension System (NPS)”
It claims, “These five projects alone have immense transformative power and can change India’s growth trajectory.” The report reads: “The Group recommends that a class of institutions called National Information Utilities (NIU) may be put in place to handle all aspects of IT systems for such complex projects.” It further states, “As conceived by the Group, NIUs would be private companies with a public purpose: profit-making, but not profit maximizing.”
NIU is manifestly an exercise in linguistic corruption with the aim of ‘building a coalition for change’.
TAGUP report claims that this concept is not a new one; some comparable examples are National Securities Depository Limited (NSDL), National Payments Corporation of India (NPCI) and entre for Railway Information Systems (CRIS). The report underlines that “The UIDAI published early on, the UIDAI Strategy Overview that described the strategic vision, from which many aspects of implementation have been derived.”
The TAG UP report reveals, “GSTN is an NIU that is being set up to serve multiple levels of Governments (Central and State) in GST”. It also states that “The IT Strategy for GST was defined and accepted within Government even before the NIU was selected.” Notably, IT Strategy for GST was also defined by Nilekani.
GSTN has been given birth as private limited company amidst opposition from Chief Ministers and officials from the Central Board of Excise and Customs (CBEC). GSTN has been set up on equity of just Rs 10 crore. Government has provided it a one-time grant of Rs 315 crore. Notably, although Government has funded this start-up it does not even have majority control.
GSTN headed by Naveen Kumar, former chief secretary of Bihar is meant for controlling all new indirect tax data from the Centre and states.
Union Finance Ministry has compelled the CBEC and Central Board of Direct Taxes (CBDT) to sign MoU for the sharing of data. This is to ensure that GSTN will be able to access and process the entire tax data-both direct and indirect taxes. It has asked the CBEC to hand over the processing of data for tax surveillance to GSTN. This has been done without any security or privacy safeguards.
It has been reported by Hartosh Singh Bal of Open magazine in a cover story titled ‘Guess who can see your tax data’ (August 22, 2013) that in November 2011, Sheila Sangwan, then Member (Budget and Computerisation), had summarised the problems with the proposals: ‘…a meeting was held on 14/15 November 2011 in the Chairman’s office (S K Goel) to discuss the structure and functions of the proposed GSTN… Dr Nandan Nilekani has mentioned as minuted that there is need to go in for the SPV even without GST being introduced. ..There was unanimity amongst the officers present that the sovereign function to be performed by the tax administration should be kept out of the purview of the GST.’
It was noted that ‘Across the tax administration in the world, the privacy of taxpayer data is accorded utmost priority and it is the practice to house this data in Government hands…’ So far Chairman of CBEC has not addressed the essential question of who would be the repository of the data. Strangely Chairman of CBEC wrote that, ‘With regard to the concern of IT Security, it is not connected to the ownership of the management—Government or non-Government. In fact, the level of security is dependent upon the standards, safeguards and control processes that are put in place by the management. The GSTN could be asked to build necessary safeguards for ensuring the security and privacy aspects…With regard to the legislative route to set up SPV as Government entity, it is in complete contrast to the decisions taken in the past and it would jeopardize the consensus achieved so far and bring the discussions back to square one.’ Why is CBEC made to hurry to comply with the whims and fancies of Nilekani and his coalition partners given the fact that Nilekani has never taken oath of office and secrecy?
It has been reported that Naveen Kumar, the head of GSTN was asked about control of the data. He said, “We will start from scratch with our own servers and beginning with a list of dealers we will start building a database of transactions on our system. For this, we do not need additional data from the Customs or any other department.” It is quite evident that servers of GSTN, a private company will be stored.
Earlier, it must be recalled that on January 11, 2011, Business Standard reported that “India has sought an assessment under the Financial Sector Assessment Programme (FSAP) of the International Monetary Fund (IMF) and the World Bank. “India did a self-assessment (by the Committee on Financial Sector Assessment, or CFSA) of its financial sector in 2009. This has given us the confidence to get our financial sector evaluated by international financial institutions like IMF and the World Bank. We have voluntarily sought a full-fledged Financial Sector Assessment Programme,” the then Finance Minister Pranab Mukherjee said at the second International Finance Conference at the Indian Institute of Management, Calcutta.
Prior to this Robert B. Zoellick, the then World Bank Chief had met Chairman of UIDAI on December 4, 2009. In a related development, on April 23, 2010, a US biometric technology company, L-1 Identity Solutions, Inc. signed a Memorandum of Understanding (MOU) with the World Bank as part of the launch of the initiative at a World Bank Spring Meeting event attended by many developing country Ministers of Finance and Communications. It claimed that this collaborative relationship with the World Bank is meant to improve the way governments in developing countries deliver services to citizens as part of the launch of the World Bank eTransform Initiative (ETI). The World Bank's ETI seeks to leverage Information and Communication Technology (ICT) to build a knowledge sharing network that helps governments of developing nations to leverage the best practices of practitioners like L-1 and others to improve the delivery of social and economic services. The knowledge sharing network will focus on areas such as electronic Identification (eID), e-Procurement, e-Health and e-Education; areas vital to promoting the participation of citizens in democratic processes, such as voting, and helping undocumented citizens get access to health and welfare programs. The World Bank has a long history of promoting similar initiatives and is currently funding 14 projects related to e-government and e-ID around the world.
On September 10, 2013 biometric data collector, UIDAI shared its contract agreement with US and French and US biometric technology companies like L1 and Accenture but crucial pages from them are missing pages from the contract agreement after Central Information Commission (CIC) heard the matter. For long UIDAI refused to share copy of all contracts given to French and US biometric technology companies, namely, L1 Identity Solutions and Accenture respectively. After examining these documents with regard to the M/s Accenture for Biometric Technology, it has come to notice that the first 237 pages appear to be in order but after that there is a one pager titled Annexure J Technical Bid Technical Bid as submitted by M/s Accenture Services Pvt Ltd. The Technical Bid document is missing. After that there is a one pager titled Annexure K Commercial Bid Commercial Bid as submitted by M/s Accenture Services Pvt Ltd. The Commercial Bid document is missing.
With regard to the M/s L1 Identity Solutions for Biometric Technology, it was noticed that the first 236 pages appear to be in order but after that there is a one pager titled Annexure I Non-Disclosure Agreement as submitted by M/s L1 Identity Solutions Operating Company Private Limited. But this document is missing. After that there is a one pager titled Annexure J Technical Bid as submitted by M/s L1 Identity Solutions Operating Company Private Limited.The Technical Bid document is missing. After that there is a one pager titled Annexure K Commercial Bid as submitted by M/s L1 Identity Solutions Operating Company Private Limited.The Commercial Bid document is missing. UIDAI has been asked for the missing pages from the copies of the contract.
In the contract agreement between the President of India, as purchaser and M/s L1 Identity Solutions Operating Company, as a "Biometric Solution Provider" it has been officially admitted that the latter is a corporation of U.S.A. based in Delaware as of August 24, 2010. L-1 has since been bought over by French corporate conglomerate, Safran Group after the US Committee on Foreign Investment in the United States (CFIUS) was convinced that there are no unresolved national security concerns with respect to the transaction. L-1 Identity Solutions announced agreement to be acquired by Safran on September 20, 2010.
L-1 has been a US company that admittedly worked with intelligence agencies of USA. Now it has been purchased by French company, Safran Group in which French Govt also has a 30 % stake and which has forty year partnership with China.
All these initiatives will lead to handing over the control over indirect and direct tax data to GSTN for tax profiling and surveillance without any legislation passed by Parliament, the personal sensitive information like biometric data is being handed over to UIDAI and its partner companies like Accenture and Safran. This undermines citizens’ sovereignty states’ autonomy and national security for good.
For Details: Gopal Krishna, Member, Citizens Forum for Civil Liberties (CFCL), Mb: 09818089660, 8227816731 E-mail: firstname.lastname@example.org