Wednesday, September 30, 2020

How can you defend egregious violence?

 The two basic principles of taxes are, "that governments should never make tax changes with retrospective effect", and two, "tax regimes must be stable in order to attract foreign (or even domestic) investment", wrote R Jagannathan. Acknowledging that "the Indian taxman has a tendency to harass taxpayers and is known to make large demands on flimsy grounds", he defends the government's $2 billion tax demand in the Vodafone case which India lost in the Permanent Court of Arbitration in the Hague recently. Vodafone took advantage of a loophole in the law to avoid paying a withholding tax on its purchase of Hutchison Essar telecom company in 2007. Tax laws should be simple and clear and not made complex intentionally to harass taxpayers. For example telecom companies in India have to pay tax on Adjusted Gross Revenue, which means income even from sources not related to telecom. Vodafone idea owes Rs 574.54 billion. Even prospective taxes have retrospective effect. For example, "if a government decides to impose a wealth tax from the current year, the tax will not be on wealth accumulated prospectively. It will apply retrospectively." In India rules are changed suddenly to catch people and businesses unawares and turn legitimate activities illegal. Walmart bought Flipkart for $16 billion in May 2018, on which it paid withholding tax of Rs 74.39 billion initially, and then a further Rs 100 billion in September. Soon after, the government suddenly changed rules on ecommerce putting the company at a disadvantage. When tax laws are changed people and businesses should be given time to make changes in their investments so as to minimise their losses but the government tries wring as much as possible out of taxpayers by catching them unawares. When taxes were increased on long term capital gains in 2018, people were not given time to book profits at the old rates. This makes the government look guilty of sleazy extortion. Not just taxes. Law enforcement agencies are used to settle scores and stifle any criticism, however legitimate. "How did an investigation of an apparent suicide by a star morph into a hunt for all drug users in Bollywood, after taking a brief detour into a cloddish probe into nepotism in the Hindi film industry?" asked The Indian Express. "The state uses investigations, evidence, chargesheets as pretexts for establishing a narrative dominance and to intimidate. It is not interested in guilt or innocence. It is interested in demonstrating that it can destroy your life with impunity," wrote Pratap Bhany Mehta. False cases are being brought against those accused of riots in Delhi in February. "In such cases the normal language of a chargesheet under UAPA is replaced by storytelling, innuendo, presumption, extrapolation, stretching of the narrative and downright lying," wrote Colin Gonsalves. Jagannathan tries to defend the government. We know better.      

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