Monday, May 22, 2017

If the rules are so complicated how can they be good for business?

The government announced an extremely complicated Goods and Services Tax regime, with four different rates of taxation and the option of taking the tax rate up to 40% by adding extra taxes called cess. India ranks a lowly 172 among 190 countries in the ease of paying taxes, which gives immense powers to tax officials. Why is the government introducing such a complicated system which will increase compliance costs for every business and lead to rise in prices? The government says it will create a common market across India and lead to growth in the economy, but the real reason is that the government wants to squeeze as much tax it can out of citizens. Why the pessimism? Because the government is training 2 million tax officers to keep a check on everyone and has increased their powers to search premises without giving any reason, which will greatly increase their ease of extracting bribes. India already boasts of the highest rate of bribery of public officials in the whole of the Asia Pacific region. We have been lamenting the nexus between politicians and civil servants, known as neta-babu raj, for years, and this is becoming even more oppressive under this government. When you pass a bad law you try to mitigate its adverse effects by strong-arm tactics. So they are warning businesses not to increase prices. Somebody has to pay for the vast numbers of accountants required to file returns every month in every state and if companies cannot pass on their costs they will run into losses and shut down. Job creation is anemic so India cannot afford job losses. Paranoid suspicion of citizens results in inability to carry out legitimate business. The suspicion is so acute that anyone moving any goods even from shop to customer will have to obtain an E-bill, which means that trucks will be held up at borders between states while their E-bills are checked. The long lines of trucks that we see now, because of octroi, will remain and may get worse if computers don't function or there is a power outage. Today perishable goods cannot be transported from an area of excess to where prices are high. For example, while farmers are throwing away tomatoes in Karnataka prices in Delhi are in excess of Rs 25 a kg. Expect farmer suicides to continue, or even increase, after GST. Meanwhile, the CBI claims to have enough evidence of financial crimes against Karti Chidambaram to put him away for a long time. Like many others before him Karti has scarpered to London. How do they get visa so easily, why doesn't the government put out a warning or do they have double passports? We should be told. Mistrust of all citizens and a first class ticket to London for the real burglars. Ain't that great?

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