TOPIC – Tax policy in trying times
(The events of the pandemic show how it is the need of the hour to modernise India’s archaic tax laws)
The word ‘lockdown’, which is Collins Dictionary’s word of the year, sums up the pain that the world underwent in 2020. As a result of the pandemicinduced lockdown, India’s GDP contracted consecutively for two quarters from April to September 2020. Some have gained from the pandemic. India’s super-rich only became richer in the first half of the year — in some instances by over three times. Between January and June, 85 new Indians were added to the list of High Networth Individuals (with a net worth of more than $50 million). While this happened, the economy was on the verge of plunging into recession. Those dealing in stock exchanges also gained. It is amazing that when the GDP is contracting, some stocks are surging to phenomenal heights. The third set of gainers comprises corporate houses, Internet service providers, laptop makers, and scientists engaged in medical research. The fourth set comprises manufacturers of masks and Personal Protective Equipment. Indian dealers have taken to this new business like fish to water. But for most of the country, the pandemic led to unemployment and an increase in poverty levels. The migrant crisis revealed how thousands struggled to make ends meet. The government intervened. Pure economics dictates a big fiscal stimulus at the time of falling GDP and unemployment. But the government chose to rely more on monetary policy like credit easing and liquidity flow. Even here, there were no cuts in rates despite the fact that the real interest rate was falling. The fiscal stimulus was provided in stages and stood at merely 2% of the GDP compared to Japan’s fiscal stimulus (21% of the GDP), Brazil’s (10%) and China’s (7%). Corporate profits have risen sharply at the expense of wages and small and medium enterprise profits. Corporate tax rates have been lowered to moderate levels but multilateral corporates have found an easy way to make big money in the time of COVID19. Digitalisation and e-commerce have made their job simpler. The tax administration is struggling with the implementation of the equalisation levy. Nonresident e-commerce operators were brought within the scope of this levy by the Finance Act of 2000. Online sales of goods and services will be taxed at 2%. Clarity is required in implementation. The taxation of multinational corporations has become a perennial problem. The nexus rule versus residence rule haunts tax administrations in all countries where multinational corporations operate. Digital taxation has to be amended in accordance with the UN Model Convention. There is need for India to act in sync with the OECD. Canada plans to levy new taxes on foreign technology companies to increase government revenues. Tax avoidance by global web companies has become acute because of digitalisation. In the field of indirect taxes, the government has been vigorously following whether multinational companies are passing on the benefits of tax reduction to consumers.
MEANING AND WORDS
Archaic (adjective) – Very old-fashioned
Synonyms – antiquated, obsolete, Antediluvian, extinct, passé
Antonyms – modern, futuristic, contemporary, voguish, neoteric
Sum up (verb) – Give a brief summary of something
Synonyms – precis, recapitulate, encapsulate, epitomize, synopsize
Antonyms – firstly, supplement, stretch, protract, proceed
Verge (noun) – The limit beyond which something happens
Synonyms – edge, brink, periphery, brim, wand
Antonyms – middle, retreat, cunt, vulva, snatch
Phenomenal (adjective) – Very great or impressive
Synonyms – extraordinary, incredible, exceptional, marvelous, stunning
Antonyms – ordinary, vile, mainstream, substandard, prosaic
Intervened (verb) – To act in a way that prevents something happening
Synonyms – interpose, interrupt, intercede, intrude, arbitrate
Antonyms – ignore, disregard, shun, mingle, fuse
Stimulus (noun) – Something that provokes or causes an action
Synonyms – incentive, spur, impetus, incitement, provocation
Antonyms – deterrent, hindrance, damper, awkwardness, impediment
Perennial (noun) – Continuing more than two years
Synonyms – everlasting, eternal, enduring, perpetual, imperishable
Antonyms – brief, biennial, temporary, intermittent, shed
Nexus (noun) – A complicated series of connections between different people or things
Synonyms – tie, vinculum, junction, ligature, concatenation
Antonyms – division, severance, split, segregation, rupture
Haunts (verb) – To appear in a place regularly
Synonyms – torments, dens, stalk, harasses, frequent
Antonyms – support, soothe, relieve, blessing, rejoice
Acute (adjective) – Becoming dangerous very quickly
Synonyms – sharp, astute, penetrating, shrewd, piercing
Antonyms – obtuse, dull, blunt, imperceptive, dense
Vigorously (adverb) – Done with force and energy
Synonyms – strongly, strenuously, mightily, robustly, determinedly
Antonyms – slowly, sluggishly, euphorically, dully, wearily