Bollywood’s fascination for the underworld can be clearly seen in the movies, but now the Indian I-T department has also revealed how the film industry is being used (by gangsters and politicians) to convert ‘black’ (unaccounted) money into “white”.
The fact that the rich in India use their money to produce films is known to many and that is why the Income Tax Department always keeps a watch on Bollywood producers, distributors, and actors. But recently they sent out a report that clearly showed how the wealthy, associated with the glitzy world of the silver screen, avoid taxes with dodgy dealings through hawala and hot-money routes.
The first-of-its-kind I-T analysis establishes major evasion practices such as:
- Suppression of receipts from movies
- Using ancillary sources
- Inflation of expenses
- Huge amount of out-of-books payments/receipts
All these reveal a a “well-established practice rampant in Bombay film industry.”
The report said that Bollywood is highly exposed to the black economy and poses myriad challenges to the tax administration.
In 2011, a leaked cable released by Wikileaks had spoken of the film industry’s underworld connections, and that “it welcomed funds from gangsters and politicians looking for ways to launder their ill-gotten gains, known in India as ‘black money’”. In 2012, a sting operation by news website Cobrapost had caught leading producers and directors allegedly admitting on camera how the industry is being used to convert “black” money into “white”.
- Director Anubhav Sinha who was caught in the Cobrapost sting allegedly agreeing to launder money.
- Kumar Sanu produced a film Utthaan, and it was allegedly made using only cash. “At the end of each day,” a production assistant says, “a vehicle filled with bags of cash would be delivered to not only workers and technicians, but also senior artists.”
- A senior filmmaker says: “In my previous film [a sex thriller], we paid our DOP (director of photography) nearly Rs. 25 lakh in cash to avoid dual taxation issues as he lived in the United States.”
- Some major production houses have registered their companies overseas, thereby arousing suspicion among taxmen.
These dodgy tax practices stood validated from the personal account of scores of technicians, line producers, distributors, confirming the practices as commonplace on film sets.
According to the report’s findings, a film is produced and supplied through a complex channel of studios, distributors, exhibitors and artists, organised around star value and fame. The process of accumulating ill-gotten funds starts with production. The producer lines up ad hoc unaccounted funds in the guise of loans under bogus names. All the bogus credits and hawala entries are offset by ‘bogus debits and factious expenses.
“The core issue is really of financing: unless a ‘star’ signs the film, banks stay away from funding. Funding in an ad hoc manner, from property dealers and other business sources, leaves clear room for grey transactions carried out of books,” says a sought-after production assistant. “The black-to-white ratio in medium-budget films not financed by banks but by multiple, small financier ranges is 60:40, even much higher in some cases,” says the source.
With inputs from thehindu.com