What is new
Corporate Tax Reforms Beverage Becoming Stronger
- Published on 10 February 2019
(Edited Image Courtesy: OECD Brochure)
Corporate income tax (CIT) reforms have lately come under intense gaze from different quarter across the world. There is near-unanimity among diverse stakeholders that the present CIT system is outdated. It has to be replaced with a new one.
Many consider Base Erosion and Profit Shifting (BEPS) as patchwork solution to the problems caused by the existing system. Some are skeptical about the emerging BEPS Version.2.
The entities chipping into the reforms broth include International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), revenue administrations, academics and leading NGOs.
The last group is also operating collectively under The Independent Commission for the Reform of International Corporate Taxation (ICRICT), a group of certain renowned economists formed in 2015.
One can divide reforms into two categories: 1) the reforms within the existing CIT system that have been accelerated by several nations. Apart from rate reductions, expansion of CIT base, such reforms have seen elimination of minimum alternate tax in the United States & Belgium. The countries spearing reforms have also adopted new approaches towards taxation of multinationals.
2) The 2nd set of reforms call for reinventing the entire CIT framework. These seek a new format for taxing corporate income with few alternatives on the agenda.
Interim Budget Speech is Drop in the Ocean of Pre-poll Oratory
- Published on 06 February 2019
(Security dog sniffing Budget Sacks. Image Courtesy: PIB)
“In one village, one person asked another: ‘What is an Interim Budget?’ Another replied: ‘It is a Budget presented by an Interim Government’. Then, the first person asked: ‘What is an Interim Government?’ The next person replied: ‘The Interim Government means that the Government does not know whether it will come back after the next elections or not’.”
BJP veteran P.S. Gadhavi from Kutch cracked this joke in Lok Sabha on 20th February 2009 while lambasting UPA’s interim budget (IB) for 2019-10. He also recalled Arun Jaitley likening IB to ‘Satyam’s balance sheet’.
Would this anecdote turn out to be real jolt for the NDA? It is perhaps this fear of loss at 2019 polls that led Modi Government to throw to wind all constitutional conventions to announce populist schemes.
It is lust for power that compelled Modi Government to offer substantial income tax sops to the middle class in IB for 2019-20 presented on 1st February 2019.
IB turned blind to the fact that India has the world’s highest corporate income tax (CIT) of 48.3 percent. This is inclusive of tax on distributed dividend, explains OECD’s ‘Corporate Tax Statistics Database’ released on 15th January 2019.
Companies are not vote banks. They are only poll financiers. The ones, lapping up electoral bonds or donating through other means, can thus wait. They can now only pray for return of Modi Government to ride on the next wave of crony capitalism.
Govt Should Hit 3 Policy Sixers in Same Way as 10% Quota Bill
- Published on 22 January 2019
(Image Courtesy: Census Commissioner)
When amending the Constitution within 48 hours is likened to hitting a six in slog overs of cricket match, electorate becomes spectators of political games.
You need not know the cricket’s nuances to watch a live match. Similarly, one need not bother about whether the constitutional procedures have been hit for a six to create a slippery lollipop.
You also need not ponder much over rare political consensus on Modi Government’s maiden sixer in slog overs - the 10% percent reservation for economically weaker sections/economically backward classes (EWS/EBCs).
It is a symbol of populism for which all parties compete. Mind you, reservation is an emotive issue for queues-tired public. Many citizens die waiting for their turn for some welfare sop or the other. Opposing a quota bill means risking loss of a potential vote bank. The unstated political logic is: If voters can be taken for a ride, so be it.
Even as spectators await more sixes promised by Law Minister Ravi Shankar Prasad, let them utilize strategic time-out on a serious note. They should understand that the first sixer won’t alleviate the miseries of EWS. It is nothing but a grand illusion.
Make In India Fails to Fuel Manufacturing
- Published on 11 January 2019
(Edited Image Courtesy: DIPP)
‘Make In India’ (MII) campaign may be rocking. But manufacturing is hobbling. It is struggling to move towards MII’s daunting target of enhancing manufacturing’s share in gross domestic product (GDP) to 25% in 2020 from 16% in 2014.
If such negativity is despised, then one can perceive MII initiative at best as working in the ‘business as usual’ scenario. This is the conclusion anyone would arrive at. And for that, one has to piece together information dished out by Government in bits and pieces. This is because there is no report card on MII in public domain.
The manufacturing’s share in GDP has inched from 16.3% in 2014-15 (year in which MII launch) to 16.7% in 2017-18. It was 16.8% in preceding two years. If the inertia persists, the share might rise to 17% by 2020.
As for jobs creation, the other day Government told Parliament that it does not collect data on employment generated under MII.
Mind you, this flagship initiative of Modi Government is anchored to National Manufacturing Policy (NMP) that was notified by UPA Government in November 2011. NMP envisages creation of at least 100 million jobs in the course of attaining 25% share of GDP by 2022.
This 25% target was actually agreed in 2009 by State Industry ministers. NDA Government advanced the timeline by two years to 2020 under MII, which was unveiled in September 2014.
Under NMP, 16 National Investment and Manufacturing Zones (NIMZs) have been conceived. Of these, three have got central Government’s final clearance. Not one has, however, been completed. If even one was partly complete, Prime Minister, Narendra Modi, would have certainly unveiled it.