gfiles magazine

October 19, 2012

Taxing the poor

Vol. 6 | issue 7 | August 2012
taxation t n pandey
Taxing the poor
Short term committees, (like the Shome committee for GAAR) have become
camouflages for implementing preset Government’s decisions
The report of the Committee headed by Dr Parthasarathi Shome on General Anti-Avoidance Rules (GAAR) released on September 1, 2012, prima facie raises the broader issue whether such short-term committees, besides providing excuses to the Government to implement their preconceived decisions, serve the purpose of streamlining and improving the tax laws of a country? This is especially because the report is based on impressions and surmises are drawn after interviewing some persons and examining tax laws of some countries without any supporting empirical studies.
The practice of appointing short-term panels to examine fiscal, economic and taxation issues of fundamental importance to provide support to the Government for decisions already visualised has grown in recent few years.  What is more worrisome is that in a vast country like India, with a large reservoir of eminent economists and institutes of worldwide repute, the Government is not tapping them to find new avenues for such studies to usher in new views, ideas, thoughts, and vision and explore fresh approaches. 
It is common knowledge that experts like Dr Vijay Kelkar and Dr Shome are repeatedly assigned tasks of conducting many such short-term studies. While this is not to question their ability or integrity or competence, to handle the tasks so entrusted, such practice from the Government side raises issue of propriety. By repetitive engagements, such persons seem to have become a part of the Government – not independent commentators!
The terms of reference outlined for the Shome Committee reveal that an important objective of GAAR is checking of tax avoidance. However, meaningful guidelines on GAAR can be formulated only after undertaking empirical studies and studying relevant data and information from countries where such schemes have worked. The terms of reference (supra) too conceive that the committee should formulate its recommendations after undertaking widespread consultations. This cannot be possible in a time span of just 10 weeks, the time that the committee was given to submit its report. While it has submitted its interim report, it has again time only till September 30 to submit its final report.  Obviously, no meaningful work can be done in such a short time, especially as the GAAR provisions stand postponed by a year.  Actually, there was no need to legislate on this issue through the Finance Act, 2012, without studying all its implications when the applicability of the Direct Taxes Code 2010 itself is uncertain..............READ MORE

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