In India’s Nagaland, a tale of taxes and corruption

Dimapur, India – Rose Dukru, 32, and her family belong to a new generation of businessmen in India’s northeastern state of Nagaland. 

But a few years ago, they decided to go back to their farming roots and began to cultivate vegetables in the village of Zhavame, unaware of the difficulties they would soon face.

“Our cabbages are famous throughout the state. In a year, the village contributes to a market value of about 17 million [rupees, or $254,000] through its produce,” she said.

Yet her family, like other farmers in the region, only see a small percentage of the revenue. When they send their vegetables to be sold in Dimapur, the state’s commercial centre, its municipal council levies transportation taxes on the vehicles bringing the produce to market – as do several armed groups along the 140km-long route from Zhavame to Dimapur.

When the cabbages finally reach the wholesale market, traders set the price of the produce, irrespective of the farmers’ production cost.

“The traders have formed a syndicate and they pay something known as ‘protection tax’ to armed groups that gives them the power to dictate over the poor farmers. There’s price monopoly here when there should be a free market. If we’re lucky, we make a small profit. Otherwise, most days end with deficits,” Dukru explained.

Last July her father, Sanyi Dukru, 54, was assaulted by traders and found unconscious by the police at midnight. As the chairman of a local farmers’ committee, Sanyi Dukru spent his days in Dimapur inquiring about the market prices of vegetables and updating farmers back home. That day was no different.

“There was an argument, and the traders attacked him with the furniture lying around. A few suspects who were taken into custody have been bailed. I don’t know whether to expect any justice from the system,” said Dukru dejectedly.

Multiple taxation layers

Nagaland, a state in northeastern India, has long been a restive region, with many demanding sovereignty or full independence from the central government.

The Naga National Council (NNC) declared the area to be independent a day before India’s independence in 1947, and later claimed that a plebiscite it held found that 99.9 percent of people favoured sovereignty.

The Indian government rejected the plebiscite, and after several failed attempts by the government to resolve the issue, the NNC took up arms in 1955. The Indian army retaliated with counterinsurgency operations, and in 1958, the  Armed Forces (Special Powers) Act was passed, which controversially gave Indian security forces immunity in conflict-ridden areas.

When the state of Nagaland was formed in 1963, it was given a special status and exempted from taxes, but disturbance in the area continued. Although separatist groups signed ceasefire agreements with the Indian government, there remain four major, and at least five small, separatist groups in Nagaland today.

Each runs a parallel government of sorts in the state, fights against the others, and levies taxes on state residents.

In 2013, a people’s movement called Against Corruption and Unabated Taxation (ACAUT) was formed to protest against the taxation by armed groups and corruption in the state government.

Joel Nillo Naga, a social activist and the co-chairman of ACAUT, said that in the past, Nagaland residents voluntarily helped provide NNC fighters with rations and other supplies. “But now, we’re asked to pay several taxes to several groups. People are being exploited on the pretext of nationalism,” he said.

“Every commodity is taxed multiple times, right from transportation to storage to the point of sale. The burden of taxation is added to the price of every product that a common man buys. In addition, there are retailers and traders who’ve formed syndicates and also decide the price at will.”

Every commodity is taxed multiple times, right from transportation to storage to the point of sale. The burden of taxation is added to the price of every product that a common man buys.

by Joel Nillo Naga, ACAUT

To back up its demands, ACAUT formed a fact-finding committee to study taxes levied by separatist groups, as well as a “high power committee”, backed by the state government, to investigate the issue further.

The high power committee found that each of the nine separatist groups imposes taxes on government employees, except the armed and paramilitary forces – which amounts to roughly two months’ worth of an employee’s salary. Even funds for flood management and irrigation were taxed several times.

“The groups function very systematically, and collect tax from the government funds through their respective ‘finance departments’. There are more than 80 departments in the government, and a tax of 5 percent is levied on each of their budgets,” explained Khekiye Sema, a retired bureaucrat who was one of the three members of the high power committee along with Naga.

“What’s worse,” he added, “is that the government officials have begun to use taxation as an excuse to pocket the money.”

Taxation or extortion?

In a camp a short distance away from Dimapur, the armed group the National Socialist Council of Nagaland, Isak Muivah, or NSCN (I-M), defended its taxation policy.

“We have the legitimate authority to tax people, just like any other government in the world. It’s a way for people to participate and contribute to the mass movement of the Nagas,” said Varengam Horam, who identifies himself as the minister of information and publicity for NSCN (I-M).

“Peace talks require money,” Horam added. “We have coordination offices in 10 countries and thousands of armed men from Nagaland deployed there. We cannot call them back or stop sending them rations and other necessary supplies. It’ll be extremely easy for us to engage in illegal activities and make money, but we don’t want to do that, so we seek people’s support.”

According to Chungkhojang Singson, an adviser to an NSCN faction called GPRN-NSCN, a small amount of 100 Indian rupees ($1.50) is collected from all villagers, but strict orders have been given to refrain from taxing funds allocated to villages for development work.

“We do not harass either businessmen or the government employees for tax. We seek a certain amount, but are open to negotiation and bring down the amount for most people,” he claimed.

Shouka Kakheto, a senior police officer in Dimapur, is quick to point out that while armed groups consider it their right to collect taxes, the police force regards this as extortion.

“The problem has become so deep-seated that people complain only when it begins to bother them. Otherwise, they’re silently paying or negotiating the amount every day,” Kakheto said.

Even when the police file cases of extortion against members of separatist groups, locals refuse to appear as witnesses in court. As a result, the accused are let go.

Tackling corruption

On top of the multiple taxes, Nagaland residents complain of rampant corruption in the state government. India’s central government allocates Nagaland a large budget each year, but little money is said to reach the public.

According to the secretary of a village committee, who spoke to Al Jazeera on the condition of anonymity, his village received only a small fraction of development funds it was entitled to under the Mahatma Gandhi National Rural Employment Guarantee Act of 2005. The village was also asked to return 40 percent of the amount it received to Nagaland’s rural development department.

“Earlier, taxation was our biggest problem,” the village committee secretary said. “Anybody and everybody would come and ask us to pay, but after ACAUT was formed, we managed to ban the paying of tax altogether as a community. But how do we tackle corruption? If we speak up, our village will be blacklisted by the state departments, and the little money that is sent will be stopped as well.”

Chotisuh Sazo, speaker of the Nagaland Legislative Assembly, denied that state funds were being misused, and said delays in payments were the result of a financial crunch in the state. “Of the total annual funds that we receive from the government, 65 percent is spent on salaries of government employees and the rest, 35 percent, on development projects. Where is the space for corruption?” Sazo said.

Yet Kuzholuzo Nienu, the former minister of Nagaland’s Public Welfare Department, admitted that corruption was siphoning money from public projects.

“There are many governments but little governance in the state,” he said. “Corruption begins in the electoral process. Nominees pay locals to cast votes in their favour, and once elected, the legislative member or minister tries to earn back the money that he spent.

“The system is so corrupt that the contractor assigned to do a particular development work by the government is barely left with any money to undertake the contractual work after the ministers, bureaucrats and different armed factions take their cuts.”

The state’s education and health systems are also deeply affected by this misuse of funds. Last September, teachers boycotted classes over the non-payment of their salaries, affecting the functioning of 49 schools.

“People feel neglected by the government, and the system of taxation and syndicates keeps them from starting out their own ventures,” said Naga.

“The frustration eventually drives them to join the separatist groups. It’s a vicious cycle.”