From: Vaidyanathan R
Subject: Should finmin be run by FM or FIIs and foreign dalals?
To:
Should finmin be run by FM or FIIs and foreign dalals?
Apr 23, 2012
By R Vaidyanathan
It all started when a government proposal on multi-brand retail (aka Wal-Mart entry) was put on hold due to severe opposition from many political parties, including a major UPA coalition partner Trinamool Congress. There was a chorus of protest from the pink papers and metropolitan rootless wonders (MROWs), also called experts, regarding the government’s inability to carry forward reforms.
For most of these semi-literate economic experts, reform means allowing Wal-Mart into India. Wal-Mart and other global majors would have allocated huge sums of money to “educate” Indians about the benefits of such “reforms”. Even Enron allocated nearly Rs 60 crore to educate us.
The finance minister and the PM seem to give audiences to FII agents and FDI dalals at the drop of a hat. PTI
Then there was the simple issue of tax payments by companies using tax havens as a shield in asset transfers – also known as the famous Vodafone case. The finance ministry correctly felt that any asset transfer taking place in India requires to be taxed even though it may be done under the corporate veil of tax havens. The Indian business of Hutchison Whampoa was purchased using offshore tax havens by Vodafone registered at Cayman Islands. Now the government correctly felt that tax havens cannot be used to deny legitimate dues to the government since “India itself is not a tax haven” and levied tax on such transactions.
The matter went to the Supreme Court which, in its wisdom, held that Vodafone does not have to pay taxes on this transaction. Of course, the Supreme Court’s opinion that our tax laws will affect foreign direct investment (FDI) is something that surprised many a financial expert since government policies cannot be, and should not be, created to suit any particular class of investors.
There are many more such arrangements in queue and the sum involved in taxes can run in to several thousand crores. So the government amended its tax laws with retrospective effect – exactly what UK did earlier. The finance ministry also brought in the General Anti-Avoidance Rules (GAAR) in the recent budget to prevent tax cheating by big business using tax havens as tax shelter. That created a huge furore with Indian business lobbies jumping into the fray.
Let us reiterate that tax havens are the red-light districts of global financial architecture. The big global accounting firms – which are also ultimately listed in tax havens – have been having a running battle with the finance ministry on this issue. A subtle form of blackmail has always been used to enable the use of tax havens to dodge Indian taxes – it is always claimed that global business will not be attracted to India, if we change our laws to make them pay tax.
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2 comments:
On the Walmart bribery scandal :
After adding in legal costs and European fines and settlements Siemens wound up paying about 3.5 billion euros, which was more like 5 percent of yearly revenue. Translating that to Wal-Mart, "with revenue above $400 billion, we'd be looking at fines above the $10 billion mark."
"Let us reiterate that tax havens are the red-light districts of global financial architecture."
He has this backwards. Actually, the governments are the extortion gangs and tax havens are the sanctuaries.
Taxation is extortion. Please do not sell me the mythology that the government provides 24 hours uninterrupted supply of water and electricity, promptly removes garbage making Indian cities the cleanest in the whole world, build fantastic roads and provides stunning levels of security which is why there is no Maoist terror in India unlike in Nepal.
Anyone who wants to believe these things are free to believe them and hand over their wealth to Sonia and the clown prince to be taken care of by them.
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