By: Nagaland Post
Source: http://www.nagalandpost.com
Category: Investment In India
The year 2012 should usher in a change in outlook. The 1991-type reform is not the ultimate. It was the beginning for a change but it is not the end in itself for India. When the prime minister Manmohan Singh says that it was one of the corrupt regime enmeshed in licence-permit raj, he is correct. But 21 years after that beginning the country has not tried to review the gains and losses of the liberalisation – if that is there or not, and the so called economic reforms – if it can be called so.
The liberalisation is there more in government announcements – one window clearance, no bureaucratic hassle, end of inspector raj. On reality check many of these are still in a quagmire of bureaucratic hassles. The process has seen the bureaucracy becoming more powerful as also the weakening of the political power. Many ministers have become ornamental and many others feel frustrated as their officials do not take the command from them. In a democratic polity the politician should be the master and not the officials. When that happens, nations need to worry. A powerful bureaucracy resists change and perpetuates the known way of functioning – non-functioning!
It is the fear of the known. The much publicised economic reforms have taken the country virtually back to the crisis of 1990. The prices are on spiral, forex reserves are dwindling, gold is touching new highs, investments are getting into critical zone and hawala is strengthening.
The worse the banks are is severe stress, need `2.7 lakh crore recapitalisation. It is likely to spread to structured finances this year, which is likely to witness default in repayments from the commercial vehicle and other sectors.
Pessimism is setting in as the much-touted tax reforms have not happened. Worse the Direct Tax Code, thankfully put off by parliamentary standing committee, has not proposed one new idea nor tried to simplify the tax process. It has only tried to strengthen the shackles of the tax officials.
It has also seen expenses of the tax collection system increasing with induction of more officials at all levels. Expenditure on tax collection is going beyond the 48 per cent of the total taxes collected, estimated by the Tendulkar committee almost a decade back.
As the economy slows down whether Singh and planning commission chairman MS Ahluwalia agree or not, the tax collections are coming down. The necessary changes in the system are not even being mulled over. It is the bane of the economy.
One needs to think over why in 2011, the outward foreign investment, by indigenous corporate, from India totalled a massive $ 29 billion. The inward direct investment (FDI) was only $ 23 billion. Capital does not flow out of a country that is viewed as a very attractive investment destination in many terms including the tax regime. If the hawala route is included, the flight would be much more. Yes, India generates a huge “black money” every year for the lack of political will – dictated by the bureaucratic insinuations – to simplify the tax rules. All such money is really not black. It is earned through legitimate means but owing to complicated and high tax rates, businessmen devise ways to skip taxes. For making the system more stringent, the bank deposits were brought under the rule of tax deduction at source (TDS). It has been one of least wise decisions.
The rationale – to tap “black money” through bank deposits is extremely faulted. People who put the money in banks already pay tax on their income. They put their hard-earned savings in banks. This is put by the government and banks for profitable investments. They pay a small interest on such deposits. It is a contribution of the people for helping build the nation. They had every right to spend or fritter that money away. Why should that be taxed?
There is bureaucratic rationale – for boosting government coffers. But they forget how it makes banking operations more expensive. Apart there used to be many small businessmen, who used to put their money in banks with the lure of earning that small interest. But as TDS started eating even their principal up, they now prefer to keep it away.
Businessmen have saved their money, but it has gone out of the banking system. Today, it is creating a big problem for the banks as they are facing sevinvestmentere fund crunch. It is now burdening the government’s revenue as `2.7 lakh crore has to come from its coffers. It bares the prudence of taxing bank deposits.
Even multinationals have devised ways to save their taxes through various operative and accounting practices.
Much of the present growth crunch and flight of capital is owed to skewed tax policies. India remains one of the highest and complicated taxed systems. If the country wants to progress it has to ensure a low tax regime with the highest tax being not more than 17 to 20 per cent, keep deposits free of TDS.
It also has to learn to end harassing so called tax defaulters. If someone cannot pay it in one financial year for any reason he should be allowed to pay that in subsequent years without any penal interest or of it is not a large amount it could even be allowed to forgone. The tax system should be lucrative and inviting for businesses to put their money in the country.
If it is not done once again the country would be condemned to repeat the history of 1990 – high taxes, low investment and growth a misnomer. It is unfortunate that bureaucrats have successfully turned the disenchantment against them to the politician. Yes, the politicians need to learn the art of governance and not fall into traps led by the bureaucracy. They also need to consider how to keep the bureaucracy lean so that people’s voices are heard.
The new reform has to be the process in simplifying of rules, procedures and functioning where the bureaucrats have the least ways to become corrupt. Stringent laws and rules, multiplication of institutions lead to higher corruption. That stymies growth. India has to become the best destination, which it is not today. It calls for the beginning of democratisation of the business and economics free from the shackles of bureaucratic control for a better functioning state.
Source: http://www.nagalandpost.com/blog/BlogArticle.aspx?baid=QkExMDAwMDAzMjU%3D-w76qFg6pwLM%3D&bid=QzEwMDA3-z9Hu68WczSk%3D
Source: http://www.nagalandpost.com
Category: Investment In India
The year 2012 should usher in a change in outlook. The 1991-type reform is not the ultimate. It was the beginning for a change but it is not the end in itself for India. When the prime minister Manmohan Singh says that it was one of the corrupt regime enmeshed in licence-permit raj, he is correct. But 21 years after that beginning the country has not tried to review the gains and losses of the liberalisation – if that is there or not, and the so called economic reforms – if it can be called so.
The liberalisation is there more in government announcements – one window clearance, no bureaucratic hassle, end of inspector raj. On reality check many of these are still in a quagmire of bureaucratic hassles. The process has seen the bureaucracy becoming more powerful as also the weakening of the political power. Many ministers have become ornamental and many others feel frustrated as their officials do not take the command from them. In a democratic polity the politician should be the master and not the officials. When that happens, nations need to worry. A powerful bureaucracy resists change and perpetuates the known way of functioning – non-functioning!
It is the fear of the known. The much publicised economic reforms have taken the country virtually back to the crisis of 1990. The prices are on spiral, forex reserves are dwindling, gold is touching new highs, investments are getting into critical zone and hawala is strengthening.
The worse the banks are is severe stress, need `2.7 lakh crore recapitalisation. It is likely to spread to structured finances this year, which is likely to witness default in repayments from the commercial vehicle and other sectors.
Pessimism is setting in as the much-touted tax reforms have not happened. Worse the Direct Tax Code, thankfully put off by parliamentary standing committee, has not proposed one new idea nor tried to simplify the tax process. It has only tried to strengthen the shackles of the tax officials.
It has also seen expenses of the tax collection system increasing with induction of more officials at all levels. Expenditure on tax collection is going beyond the 48 per cent of the total taxes collected, estimated by the Tendulkar committee almost a decade back.
As the economy slows down whether Singh and planning commission chairman MS Ahluwalia agree or not, the tax collections are coming down. The necessary changes in the system are not even being mulled over. It is the bane of the economy.
One needs to think over why in 2011, the outward foreign investment, by indigenous corporate, from India totalled a massive $ 29 billion. The inward direct investment (FDI) was only $ 23 billion. Capital does not flow out of a country that is viewed as a very attractive investment destination in many terms including the tax regime. If the hawala route is included, the flight would be much more. Yes, India generates a huge “black money” every year for the lack of political will – dictated by the bureaucratic insinuations – to simplify the tax rules. All such money is really not black. It is earned through legitimate means but owing to complicated and high tax rates, businessmen devise ways to skip taxes. For making the system more stringent, the bank deposits were brought under the rule of tax deduction at source (TDS). It has been one of least wise decisions.
The rationale – to tap “black money” through bank deposits is extremely faulted. People who put the money in banks already pay tax on their income. They put their hard-earned savings in banks. This is put by the government and banks for profitable investments. They pay a small interest on such deposits. It is a contribution of the people for helping build the nation. They had every right to spend or fritter that money away. Why should that be taxed?
There is bureaucratic rationale – for boosting government coffers. But they forget how it makes banking operations more expensive. Apart there used to be many small businessmen, who used to put their money in banks with the lure of earning that small interest. But as TDS started eating even their principal up, they now prefer to keep it away.
Businessmen have saved their money, but it has gone out of the banking system. Today, it is creating a big problem for the banks as they are facing sevinvestmentere fund crunch. It is now burdening the government’s revenue as `2.7 lakh crore has to come from its coffers. It bares the prudence of taxing bank deposits.
Even multinationals have devised ways to save their taxes through various operative and accounting practices.
Much of the present growth crunch and flight of capital is owed to skewed tax policies. India remains one of the highest and complicated taxed systems. If the country wants to progress it has to ensure a low tax regime with the highest tax being not more than 17 to 20 per cent, keep deposits free of TDS.
It also has to learn to end harassing so called tax defaulters. If someone cannot pay it in one financial year for any reason he should be allowed to pay that in subsequent years without any penal interest or of it is not a large amount it could even be allowed to forgone. The tax system should be lucrative and inviting for businesses to put their money in the country.
If it is not done once again the country would be condemned to repeat the history of 1990 – high taxes, low investment and growth a misnomer. It is unfortunate that bureaucrats have successfully turned the disenchantment against them to the politician. Yes, the politicians need to learn the art of governance and not fall into traps led by the bureaucracy. They also need to consider how to keep the bureaucracy lean so that people’s voices are heard.
The new reform has to be the process in simplifying of rules, procedures and functioning where the bureaucrats have the least ways to become corrupt. Stringent laws and rules, multiplication of institutions lead to higher corruption. That stymies growth. India has to become the best destination, which it is not today. It calls for the beginning of democratisation of the business and economics free from the shackles of bureaucratic control for a better functioning state.
Source: http://www.nagalandpost.com/blog/BlogArticle.aspx?baid=QkExMDAwMDAzMjU%3D-w76qFg6pwLM%3D&bid=QzEwMDA3-z9Hu68WczSk%3D
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