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« Indirect Tax »
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Indirect tax
September, 21st 2011

At first glance, the arguments in Tax rates and inflation (Business Line, September 19) seem convincing. But we cannot forget the fact that out of the 120 crore population, only 3.36 crore pay taxes in India. One should not forget that even this number has been achieved only by lowering the tax rates, resulting in better compliance for the last several years.

The number of tax evaders, and the money invested in tax heavens, increases because of the high tax rates only. What we have to do now is to reduce tax rates and increase the tax base, enforce compliance and insist on penalties for evaders.

More importantly, we have to look into indirect taxes. A rich businessman and a streetside vendor pay the same amount of indirect taxes, even when they purchase a match box. How can we tackle this? Instead of increasing the income tax rates further, and thus forcing more assessees to suppress their real income, why don't we think of devising a differential mechanism, with which the rich pay more tax by way of indirect tax also?

We cannot compare India with France, Germany or the US, where the majority pay taxes and there is also a well-set social security system. The need of the hour is to include more in the tax net, by reducing the tax rates and enforcing compliance. This will definitely pay off by higher collection as well. However, we can think of a super tax for incomes above a substantially-higher threshold.

Most importantly, the citizens must feel that the taxes collected by them are not siphoned out of the system through corruption and they also get a reasonable quality of service in return, equivalent to the tax they pay. Unless the citizens get a quid pro quo for the taxes they pay, any increase in tax rates will only generate more black money.

Jameskutty Antony


Leadership emulation

HUL's school for leadership (Business Line, September 19) is a very good article. It is a rejuvenating piece of information on the HR practices in HUL. Sometimes I wonder why such outstanding best practices are not adopted by my employers the Indian Railways.

There are many good lessons to be learnt by reading this interview with Ms Leena Nair. I hope many more companies emulate HUL because it is the ultimate, as much as I know.

Rajiv Chaturvedi


Inflation and consumption

The article A shift away from mindless consumption (Business Line, September 19) made useful reading. If each one in the country consumes the quantum of goods and services that he or she really needs and shares the excess with others (perhaps on profitable basis) there wouldn't be poverty, inequalities of income and wealth and above all inflation (against which the government is fighting a losing battle) in the country.

S. Ramakrishnasayee


Private banks

This refers to the article Private banks, then and now (Business Line, September 16). Want of transparency, of transaction charges, accountability to customers, procedures, process of functioning, more pressure on marketing of products, more concentration on quantity, make it difficult for private banks to survive in a competitive market.

The minimum balance should be fixed at Rs 1,000, as most of customers are middle-class in India. As soon as the private banks get licenses, they start having tie-ups with the insurance sector and pressurise employees into selling insurance products rather than banking operations.

The additional benefits such as insurance, international debit card, quarterly average balance of Rs 5000, provided by banks' utilisation is practically negligible. With this, productivity gets reduced and so does long-range survival in the competitive market. The RBI should regularly do an audit and constantly check the operation of the new private banks.

Vedula Krishna


Taken for a ride

There is definitely an element of truth in the article Gold gets increasingly illiquid (Business Line, September 19). If you walk into a jewellery store to exchange a gold coin for jewellery, you get 34 per cent less gold when you walk out of the store. This is the case only in the Chennai market, since they charge wastage, as well as mark up the price per gram (with respect to international prices, Chennai prices are higher by 5-10 per cent).

I have been quite amazed at the ads we see these days, claiming lowest wastage, etc., since I cannot accept the fact that I need to pay for wastage to buy a jewel and lose wastage to sell it, while all along I am only buying a finished article. Elsewhere, I would look up the price per gram (as per the shop) and weigh the jewel, multiply the two numbers to arrive at a retail price, which is subject to negotiation.

Unfortunately, we Chennaiites have been taken for a ride. I do not agree with the idea that the Exchange-Traded Fund option is safe as well.

Sowmy VJ


Dollar at risk?

I am just an ordinary Indian, intrigued by global economics. Recently I came upon some information that shocked me. This is from the Web site of a US senator Bernie Sanders.

The first top-to-bottom audit of the Federal Reserve uncovered new details on how the US provided as much as $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. $16 trillion is more than the US federal debt of $14 trillion. If the $16 trillion is released into public domain, it will entirely devalue dollar holdings and assets.

The time is right for various news media to highlight the possible devaluation of dollar assets in the near future and to rope in experts to suggest alternative options for stable asset denominations.

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