Expert Zone
Straight from the Specialists
GAAR: Irrational tax laws or misplaced arrogance?
(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)
The congratulatory press clippings proclaiming the ‘rollback’ of measures in Finance Bill 2012 have suddenly cleared the air and even the stock market cheered on Monday.
The implementation of the much riled General Anti-Avoidance Rules (GAAR) was deferred till April 2013.
The onus of proof when invoking GAAR will now be shouldered by the tax department. More importantly, it has also provided for an independent member on the GAAR board.
Finally, the GAAR has been subjected to the advance tax rulings facility so that its applicability can be established before the transaction is executed, thereby providing investors with the ability to plan their tax liability in advance. Such rulings will be binding to the applicant and the Commissioner unless there has been a misrepresentation of facts.
It has been well established for some time in Indian law that tax planning will only be legitimate provided it is within the framework of the law and the use of colourable devices which (even though within the letter of the law) results in defeating the basic legislative intent of the tax statute cannot be permitted.
At the same time, it was also well known that even countries like Australia and Canada, widely touted as examples of open economies, had enacted similar tax provisions as far back as the 1980s.
With markets falling, it’s a good time to invest
(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)
The Sensex tested the 16,000 mark last week after 15 months.
I believe the following three quotes which made headlines on different days, tell us a lot when we put them together.
World Bank chief Robert Zoellick said “what we have seen is that confidence is a fragile element of how the market economy works. The convergence of events in the U.S. & Europe had rattled investors in countries already struggling to cap sovereign debt issues and unemployment”.
Sir Martin Sorrell, head of WPP (global leader in advertising) said “Brand India is far stronger than Brand UK and Brand US”.
Lastly, the Indian finance minister said “FII flows will eventually lead into Indian markets which look comparatively better”.
It is therefore, surprising that India’s Sensex lost 16 pct since Jan 2011 and about 7 pct since S&P’s U.S. downgrade, less than Germany’s DAX ( fall of 22 pct and 12 pct respectively) which is into the thick of the danger zone.
It’s time India reposes faith in itself
(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)
The one thing common across Asian tiger economies, including China, is that all of them have had to give up political liberties to achieve economic freedom. The situation in India is just the opposite.
Nowadays, it seems difficult to avoid an animated discussion on corruption, inflation due to our inability to drive a consensus for reforms and muster up the political will to enforce governance. Some mourn the beginning of the end of the India growth story.
A few hours into any cocktail party and lo behold the panacea for all India’s ills emerges: a baton-wielding authoritarian ruler.
The current political scenario seems to be the collective manifestation of these feelings.
India broke away from the shackles of exploitative colonial rule 65 years ago. The economy was in shambles and suffered a near flat growth rate for a decade. The first five-year plan began with a growth forecast of a mere 2.1 pct. The Cold War left our fledgling nation with no option but to continually weigh our politics on the one side and balance growth and poverty alleviation on the other. The balancing continues even today despite growing at over 8 pct.
Not till the 1990s when the Berlin wall came down taking with it the Soviet Empire and India suffered a balance of payments crisis, did we find the political window to initiate our first bout of financial reforms. FDI was encouraged, utility monopolies were gradually put down and service sectors including IT were given the opportunity to grow.
Impact of U.S. debt downgrade
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Standard & Poor’s has cut the U.S. triple-A rating down to AA+ which if one is to go by the technical meaning, says the U.S. is no longer as reliable as it was last week when it comes to repaying its debts.
U.S. debt is now hovering around 100 pct of its GDP ($14-15 trillion).
However, what’s more worrying is the manner in which U.S. politicians driven by short-sighted electoral objectives pushed the country to its reputational edge, making them look very similar to some of the much maligned emerging market leadership which lacks political will to take hard and nonpartisan decisions.
The game was not very different with the Republicans sheltering the rich with lower taxes and wanting to prevent the Democrats playing to their gallery by spending on welfare.
As a lender would put it, the quality of management and ability to deliver the growth agenda while keeping its accounts balanced is in doubt.
This has not gone unnoticed by S&P and has contributed to the downgrade decision which it also says is based on projected growth leading to the debt reaching $21 trillion in ten years.
