In Brian De Palma’s The Untouchables, Al Capone (Robert De Niro) is brought to justice not by the cops but by an unassuming accountant for not paying taxes on his illegal businesses.
Surrogate ads
If you walk into one of those shops shown in the image above to buy a mixer or a set of glasses, you will be disappointed! The person at the counter will look at you blankly. You will also not see any of these products on the shelves.
Welcome to the world of surrogate advertising!
Advertising liquor is banned, so companies work around the ban with such advertisements. The idea behind these surrogate ads is to advertise something else with the same name as the drink, whether it’s music CDs, playing cards, soda, glassware, or water.
Over the years, the Advertising Standards Council of India (ASCI), government and the courts have been trying to regulate the liquor companies, but they have been able to successfully skirt their guidelines. Recently, new draft rules have been issued for discussion. One new rule requires that advertising must match the sales. If you’re spending crores to promote your soda, you must also have commensurate sales, not just a token shipment to justify billboards across the city.
The Income Tax Act
Under the Income Tax Act, companies are allowed to deduct expenses that are “wholly and exclusively” incurred for the purpose of their business. Any expenditure linked to an offence cannot be claimed as a deduction. Courts have upheld this principle time and again.
How about disallowing the advertisement expenditure incurred by liquor companies?
If we were to disallow the entire advertisement expenditure for liquor companies that engage in surrogate advertising, the liquor companies may find it too expensive to indulge in it anymore. What self-regulating bodies like ASCI or the courts have not been able to implement, the accountant and the taxman can achieve.
Economic incentives are best suited for shaping societal behaviour
This tool of disallowance can be extended to other areas too. For example, the United States has struggled with illegal immigration. There are two kinds, actually, those who have come in during the last few years and those who have been living there for decades. While some efforts focus on deporting recent or criminal entrants, the larger issue lies with those who have stayed on for years. They are employed by companies that knowingly look the other way.
But if there were a law that either made it illegal to employ them, or simply required a disclosure of all payments made to individuals without the necessary papers, the companies would be forced to be more mindful. At the very least, we’d know the correct magnitude of the problem. Otherwise, the figure of 11 million, repeated for years will stay frozen in time.
All this is fine but we are often content being a wink-wink society. We all know that something is not right. But we let it pass.
As the famous quote on Indian consumer behaviour goes “Saar—We are like that wonly.”
Hari’s Curries
A buffet of reflections