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Cairn case Might prod India to Revisit its dual Stance on Retro tax
- Published on 01 April 2015
(Image Courtesy: World Bank)
The new Indian Government’s Jekyll and Hyde approach towards retrospective taxation unleashed by its predecessor might prove costly in the case of Cairn Energy Plc.
The Government, led by National Democratic Alliance (NDA), has dubbed Cairn case as a legacy issue of United Progressive Alliance (UPA) regime. It wants such cases to run through the legal process. At the same time, it has reiterated its commitment to not resort to retro-taxation except in rare situations. It has repeatedly vowed to end tax terrorism.
The new Government has, however, refrained from repealing retro-tax law, which it can do easily with absolute majority in Lower House as pointed by ex-Finance Minister P. Chidambaram. The existence of retro-tax provision in the Statue would thus always remain a business risk factor for the corporate sector.
The NDA Government is thus speaking in two voices that smacks of Jekyll and Hyde syndrome or split governance to be precise.
Cairn Energy has, however, subtly referred to NDA’s credibility deficit on retro-taxation. To a recent query from an analyst as to “how does this (tax notice) square with the Indian Finance Minister's comment that he is never going to use a retrospective capital gains tax again.”
Cairn Energy Chief Executive Simon Thomson quipped: “It doesn't square.”
Don’t use Monetary Policy as a Magic wand to tame Inflation
- Published on 28 March 2015
(RBI Governor & Finance Minister: Edited Image Courtesy-PIB)
Govt must be Equally Accountable as RBI for Failure to Subdue Inflation
Facts have become the casualty once again. And the urgency for an integrated approach to inflation control has got derailed with the national discourse riveted to media-hyped “rift” and “escalating tension” between Finance Ministry and Reserve Bank of India (RBI).
A few news stories have tried to project the old professional differences between the two entities as the ones between Finance Minister Arun Jaitley and RBI Governor Raghuraman Rajan.
Mr. Jaitley has thus aptly stated that there is no disconnect between the Ministry and RBI and both are engaged in constant and frank discussions.
Before coming to need for a rationale and comprehensive inflation control strategy, consider first a few facts. It is fact that the differences over public debt management agency (PDMA) and monetary policy committee (MPC) are not between Mr. Jaitley and Mr. Rajan. Both are merely reflecting the well-know respective stance of the respective entities they head.
The differences are not new. They had developed much before the two decision-makers assumed charge of their respective offices. It is just a re-emergence of turf battle that has simmered for several years.
Mr. Rajan has in fact staged climb-down from RBI’s well-reasoned reservations over setting up of PDMO and inflation management as stated in December 2012. RBI had communicated its reservations as feedback on Financial Sector Legislative Reforms Commission’s (FSLRC’s) Approach Paper.
The Mid-Year Economic Analysis 2014-15 has nothing substantial to flaunt for backing up the budget’s tall promise to roll out initiatives to herald the second green revolution
- Published on 28 March 2015
FM Should hug Big-bang Ideas to Realize PM’s Vision for Speedy Reforms
- Published on 13 March 2015
(PM & FM at Vibrant Gujarat Conf.- Edited image courtesy: PIB)
NDA Government is wedged in a piquant situation. Its Prime Minister Narendra Modi is a reforms visionary, a dream merchant and a calculated risk-taker. His most important Cabinet colleague, from the growth standpoint, on the other hand, believes in real politik. Finance Minister Arun Jaitley is also averse to taking political risks as is evident from his pre & post-budget reactions to the idea of big-bang reforms.
His cautious approach towards reforms is evident in his decision to defer a call on recommendations of four reports of tax administration reforms commission (TARC), first report of Expenditure Management Commission (ERC) and non-binding recommendations of 14th Finance Commission (FFC).
Mr. Jaitley had set up ERC for seeking guidance on urea pricing reforms, an issue his two predecessors talked loud in their respective budgets. Both, however, did not dare to bite the bullet.
The dichotomy between the styles of Captain (PM) & the Lieutenant (FM) is constraining the pace and depth of economic reforms. Add to this the lacklusture performance of certain ministers. The resulting picture of NDA’s overall performance would turn out to be modest. This, in turn, has subdued the optimism that the nation exhibited in May 2014 when BJP won the Lok Sabha polls with stunning majority that no one dreamt.
To fulfil the public’s core expectation that BJP-led NDA Government would be different from UPA regime, Modi Cabinet would have to take bold initiatives including unpopular ones and implement them well.
Before suggesting a few big bang ideas that Mr. Jaitley claims no one has given him, consider first Mr. Modi’s crucial statement on reforms.