May 24, 2012

Tax records from 1964!

By any standards, bureaucrats in any country are seen to be slow moving, rule-obsessed, removed from reality and impractical. This is so even in countries where they have a stellar reputation, simply because they are compared against their private sector counterparts who are even better. Same goes for politicians.

But India has been cursed with "babus" (bureaucrats) and "netas" (leaders) that set global records when comes to ridiculous and outrageous actions and statements. Sometimes it is just amusing - you laugh at them and move on. But there are times when it does serious damage to the country, its reputation and negates the hard work of millions of Indians who, directly and indirectly are building the country's image brick by brick. Just as China is developing a reputation for fakes that is going to take decades, if not centuries to shake off, India is developing a reputation for petrified officialdom that is an insult to the intelligence of its citizens and a serious threat to its growth and standing in the global arena.

India is now the laughing stock of the business world because of a nonsensical and utterly indefensible tax law that allows the taxman to re-open and question any tax matter going all the way back to 1964 ...yes you read it right - 1964.  There is yet another amendment that taxes royalties on software going back to 1976..as if one is not enough. May be there was no software in 1961 or it may also have been dated earlier.

Why because one company, using some clever moves, managed to 'evade' tax. That is assuming the highest courts of the land were wrong in rejecting GOI's stand. On top of insulting the intelligence of Indians and destroying the country's reputation, these people are also telling the highest court that they don't matter, because if they pass judgement that is not in my favour, that can be retrospectively reversed, going back to 1964 ...when most Indians were not even born!

Now another set of babus and netas are going to accumulate frequent flyer miles and go on junkets explaining to global community worried over such disturbing moves and its impact. Are we a nation of laws or a extortionist society where the democratic process is abused to get away with such nonsensical moves? Do they even benefit the country? Even if India were to gain $5 billions, what is the cost in terms of lost investment, lost jobs and lost years? Even if you take a narrower view, do they even benefit the Income tax authority?

If anyone comes to the conclusion that his earnings, even after paying lawful tax, are not secure from such arbitrary extortionist moves in a so-called democratic country, you can excuse them for shipping them overseas or not even bringing them home at the first available opportunity. Any wonder Indian rupee is nearing the 60 per dollar mark? Who pays for that? The ordinary guy on the street who has to buy fuel for Rs.70 per litre. Not the babus whose salaries are indexed to inflation and protected against anything short of nuclear holocaust.

It is interesting to note that there are no clear guidelines on what constitutes a taxable profit in India regardless of whether it happens overseas or not. For example, if Mrs. Watanabe, a housewife in Kyoto buys Suzuki shares in the Tokyo stock exchange and profits $1,000 from it because the prices went up after they did well in India, does she have to pay Indian tax?  What if the same Mrs. Watanabe makes $10m and not $1,000? What if Suzuki's revenues are 10% from India, or 20% or 50% or 70%? Where does it start and stop?

Obviously you will have our babus ridiculing such questions. But then where does one draw the line and more importantly who draws it? It is a transparent process that is clear to all or is it yet another shady secret that changes according to the whims and fancies of the babu and how 'flexible' he is to the lure of the greenback?

Does India have the muscle to enforce such laws? Uncle Sam can squeeze the Swiss banks by their b..s to get a list of American taxpayers stashing money with them...can we do it? Are we even willing?

If such questions are not answered and a transparent process and law that does not change retrospectively at the drop of a hat created for everyone to understand and follow, it is perfectly legitimate for someone to come to a conclusion that it is simply yet another clever move by the ruling class to arm itself with nuclear warheads and use it for extorting bribes and donations.









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