Budget 2013 - my main take-away!

(This is not a post about my views on the subject of taxation at large. That is a MUCH broader subject - and one which I would like to sometime expound on from a philosophical angle, including a discussion on role of government. This post is purely about Budget 2013 and the one item that I want to highlight).

The Union Finance Minister of India, Mr. P.Chidambaram (PC) presented the Finance Bill 2013, containing the Budget for 2013-14, to Parliament yesterday.

As usual, there was a lot of anticipation and discussion before the budget presentation.

And, as usual, there was a lot of discussion after the budget presentation.

The media – print, TV and social media – was expectedly in overdrive. Analysts, economists, “tax experts”, who suddenly seem to be a dime-a-dozen come budget time, got their 15 minutes of fame (some only 5 minutes in an overcrowded space), all of them eager to add their decibels to the noise. Corporate honchos, an increasingly prominent and vocal constituency in an increasingly capitalist India, were keen to share their wisdom and cover their own bases. And of course, politicians were not to be left out – their opinions on such occasions always admirably reflecting their self-interest.

It was all a lot of fun, if a little too much sometimes. The key when such an event happens is to know when to switch off and on. The media, always hungry for content and salivating on such occasions IS most certainly not going to hold back – it is upto the recipient to pick and choose.

Much of the post-budget discussion was spent in “rating” the budget. Various analysts gave it a thumbs-up, many qualifying this by saying “It was good, but that’s mainly because it could have been much worse. The budget could have raised taxes much more than it did, given our fiscal deficit situation”.

Most of the analysts, when asked for their main take-away from the budget speech, talked about the balancing act that the FM had done.

His attempt to continue on social equity initiatives without jeopardizing what has now become a fairly stable tax regime.

His efforts to boost investment through measures like the investment allowance.

His announcement of the first public sector women’s bank also came in, expectedly, for a lot of attention and discussion.

His announcements, potentially affecting investments for FIIs from tax-havens. This seemed to confuse many. In a post-budget press conference this was one of the areas he was most quizzed about. He went to great pains to try to explain the changes in this area.

The other much-talked about announcement in his speech was his intention to impose a one-time surcharge (of 10% of tax) on taxpayers with a taxable income of Rs 1 crore (Rs 10 million) or more. This would be a one-time exercise and, together with increasing taxes on corporate with profits of over Rs 10 crore, is expected to bring in additional tax receipts to the government.

Obviously there was much more than all this but I’m not going to discuss the budget. I’m not competent to do so.

What I want to talk about is MY main take-away.

Let me start by saying I’ve always enjoyed reading about the Union Budget. From the very first one I remember reading about (Finance Minister C.Subramaniam’s budget of 1975 – which I didn’t understand anything about), to this day (when I still don’t claim to understand too much), budget days have been interesting and full of anticipation.

I’ve always liked to know where my country plans to invest its thousands of crores. How much in Defence, how much in Healthcare, how much in Education and so on. And where all that money is going to come from. Early on, I realized that – in a “planned economy” model - where there’s no allocation, one shouldn’t expect much to happen in that area.

Of course, allocation in itself doesn’t really mean much in a country where there is NO real follow-up or accountability. So it ends up being a license for the concerned Ministry to spend the allocated money, without having to show deliverables against the money spent. Ok, so there’s a CAG which is supposed to audit government accounts but the whole system is such that it doesn’t lend itself to easy transparency or public scrutiny.

But we all know this, we keep ranting about it – that’s a matter for another discussion. This is about this Budget.

The reason I digressed a bit into giving a slightly personal historical perspective is that I’ve long since stopped caring about the nitty-gritty details of a budget. I’ve seen too many budgets just tinkering with the numbers for me to care too much. An amount of 10,000 is changed to 15,000. A 20% is made 25%. That sort of tinkering. Often this tinkering gets a lot of attention – and everybody’s happy (or unhappy).

Over the years, especially as I’ve grown older, I’ve learnt to look at matters holistically instead of being caught up in the instance. I’m not talking only about this budget. I’m talking about most things. From politics to sports to religion to business to social matters – events and instances happen everyday (and we get caught up in them) but it's important to remember they work within a framework established earlier. They are rarely isolated instances. So it is often much more meaningful to look at that framework – to question its legitimacy, its currency in today’s times – rather than pick on the instance.

For example, religious rabble-rousing. Incidents happen every day, we get caught up in who said what and did what. Instead of looking at the framework in which society breeds such passions. If we don’t fix that framework, we will only be addressing every incident.

Or, our security issues. We react on every bomb blast - again, addressing every incident. Or our Freedom Of Expression issues. Or our Violence Against Women (VAW) issues.  I can go on and on. We get caught up in the incident – we might even try a quick cause-and-effect exercise for that particular incident. But we then leave it at that. We don’t look at the entire gamut (or at least a broad enough canvas) of the issue to come up with a holistic approach to addressing it.

But I’m digressing. This is about the budget exercise – and my main take-away.

The budget exercise is supposed to present the govt’s accounts (at a high level) for the current year. And supposed to present its estimates for the coming year. It is of course an excellent opportunity for the Finance Minister to share his thoughts on the financial state of affairs of the country, his concerns, what he perceives as opportunities, how he plans to address his concerns and so on. A sort of “State of the Nation” address – but economy-oriented. Of course, the Economic Survey is a big part of this – and is often the basis for the proposals for revenue and expenditure planning.

This is always the first part of every budget speech. And sets the tone for the expenditure and revenue planning.

Yesterday, the FM made it clear early on itself that his budget did not give him much room for providing tax relief in terms of existing slabs or rates. There was a token relief – too token to be considered significant, in my opinion, though he did emphasise that a certain number of crores of taxpayers would benefit. He also said that if he wanted to have a broad tax net and revenue base, he could not afford to raise the slabs.

I was a bit confused – so I put on my “holistic” hat.

What is the real purpose of taxation?

To collect revenue?

Or, to get as many taxpayers as possible?

What, if the Finance Minister could get more high-income taxpayers into the net? So that, even at existing rates (or even lowered rates), his revenue could be sufficiently augmented? Would that mean he’d find it ok to leave the marginal (first-slab) taxpayers out of the tax net? Since the new taxpayers would be high-income, many more marginal taxpayers can afford to be left out of the net.

Of course, there would then be comparisons with other countries to justify an approach. The US, Europe etc. India has a very moderate tax regime compared to Europe. (It is a moot point though what the tax payer gets for his tax payment). So why should the govt pamper its citizens even more, with higher slabs and lower rates? Should India anyway compare itself with the US and Europe? Very different economies, at different stages of development and need for growth, with different demographics, aren't they?

Even as I was mulling over this, I heard the FM say something that shocked me.

He was talking about the surcharge on those with a taxable income of Rs. 1 crore or more (Everybody’s been calling them the “super-rich”, but the FM didn’t like use of this term).

He said there were, in all, 42800 such individuals and entities who were covered by this.

My first reaction was “What??? Just 42800? In all of India? You’ve got to be kidding me!”.

And THIS is MY biggest take-away from the budget speech.

This figure of 42800.

The FM said it, without batting an eyelid.

Surely he himself knows that this is a ridiculously low figure, given the number of businesses we have in the metros alone, leave the rest of India aside for a moment?

What have his Income Tax officials been doing?

If they really put their minds to it, they could get many more in Mumbai’s Kalbadevi area alone, I’m sure. An annual taxable income of 1 crore, in today’s India, is not really that much of a big deal.

Similarly, other metros have their catchment areas.

It is not about the magic figure of 1 crore. It is about the blatant extent of tax evasion among those in the high-income brackets. And how easy it really should be for the Income Tax Department to find these individuals/entities, should they focus on it.

So, if THIS is set as a target for the Income Tax officials – that they rope these into their net – we should have a much more comfortable revenue amount collected by the government. The Finance Minister wouldn't have to sweat so much.

And maybe this then allows the government to consider some relief for those at the marginal level. Ok, that may mean some will fall out of the tax net, but so what? Many of them aren’t exactly living a luxurious life anyway – what with the general cost of living and inflation nowadays. Also, it will simplify the administrative work of the Income Tax Department and give a number of marginal taxpayers peace of mind.

If however, the Finance Minister chooses not to pass on any relief to existing taxpayers, at least this would have augmented his collections and helped in his efforts to rein in the fiscal deficit.

What’s most important is that these need to be brought into the tax net on a war footing. I repeat – I don’t see why it should be so difficult to do this. And this is not a one-off. Once they are in the tax net, the revenues would flow in every year – and far more than from the marginal many.

THIS then is one of the biggest weaknesses in our system. Our poor tax collection record. And this needs to be holistically and structurally addressed.

42,800?

Ridiculous!!!

Samsung - when "marketing" goes horribly wrong!

Disclaimer: I have NOTHING to do with Samsung or any of its competitors. I have NOTHING to do with the tech or professional blogging industry.  Am just a random blogger who has opinions on all sorts of things in this world and does not usually keep his opinions to himself. You are most welcome to disagree with my views – and I respect your right to do so. So, with malice towards none...

One of the hot topics doing the rounds on social media in the last few days is about how two tech bloggers from India were sent by Samsung India to Berlin to cover the IFA event there. There’s a lot available about this whole sordid episode on the net – I will not therefore repeat the whole story. You can catch more about it here .

In short, the two bloggers (one of them preferred to not be named, the other who has raised a hue and cry is Clinton Jeff (CJ), apparently a well-known tech blogger) clearly agreed to be sent by Samsung only in the capacity of “reporters” and not “promoters” for Samsung. Once they’d reached Berlin however, they were required to undertake various promotional activities. When they refused, they were told that from that moment on, they were on their own - Samsung would not arrange for their return flight / hotel accommodation.

Maybe I’m over-simplifying the whole thing – and like I said, more details are available on the net – but I don’t want to add to the echo by just repeating what’s already out there. Besides, I know nothing about the mobile tech industry, nothing about tech blogging, not much about product marketing – so, while common wisdom would suggest I should just keep my mouth shut, I do think I know a bit about corporate behavior. And I do think, at a holistic level, this is more about that than about any specific incident.

So here’s my high-level take on this, after reading a number of blogposts on the subject (and hundreds of comments from people far more experienced in this field than I am).

First of all, it is absolutely inexcusable that a company makes a threat like this to anybody – to just leave the person high and dry, in a foreign land. Not only is it thoroughly unprofessional, it is JUST NOT ON! At the very least, if the company was unable to work it out with the bloggers in Berlin, they could have taken action against them on their return to India. IF they felt they had a case. That would have been the professional thing to do – I give you a contract, you breach the contract, I sue you. Instead, they went the “mafia” route. What is this? Godfather – Part 4?

Secondly, I do think Samsung does not even have a fig-leaf to cover itself in this matter. For me the absolute clincher is that the bloggers (well, CJ at least) made it very clear UPFRONT that they would go only as “reporters” for the event and not as “promoters”. The moment they made that clear, Samsung should have backed off.

But clearly Samsung, for some reason, WANTED them to go. So they, as is very common in such situations, trivialised the difference between “reporter” and “promoter”, effectively ignoring it (and, as anybody with any sense of integrity will tell you, there is a BIG difference between the two).

Samsung knew all along what it wanted from these bloggers. It was not the first time they were arranging this marketing programme – they knew exactly what it involved. And if they didn’t, they should have. And they should have communicated it in full detail upfront to the bloggers. If, after doing that, the bloggers chose to still go ahead – and then backed out onsite – Samsung may have had a case (even then the “mafia” treatment would not be on!). Without this disclosure, Samsung really did not have much of a case – which may be one reason why they went with the mafia approach. It could well have worked – when you are in a foreign land (apparently at somebody’s mercy), you are more easily malleable to demands from that party.

Unfortunately for Samsung, it did not work. CJ did not just “roll over” – and from that moment on, it began going wrong for Samsung.

In typical corporate damage-control mode, Samsung will now be desperate to save some face from this episode. It will become a PR case-study (maybe for students in college too) – but to me this is more than just a public relations issue.

This is an integrity issue. It is an issue of ethics.

Had this been a start-up, in its first product launch event, trying to garner a bunch of guys to help market its products I may have understood a goof-up like this. Start-ups often do not have systems  in place, they don’t have elaborate dos-and-don’ts or processes laid out, they make mistakes, they learn from them, they hone their processes.

Samsung is hardly a startup. They are at the bleeding edge of consumer products and consumer marketing. They must be having huge marketing budgets and teams, they’ve done lots of product launches, this particular launch in Berlin is not their first. In fact, they have this “Mobi!er” programme for a while – so they must be considered veterans at this game.

That is why I absolutely refuse to believe that this was just a one-off, unfortunate incident due to a “misunderstanding”. Ok, so this one came to light – I wonder how many have not come to light at all? Either because a deal was struck, or the concerned blogger caved in, or just didn’t bother to make an issue of it. I think I’ve read something about a France-related Samsung incident too.

I don’t want to make this about Samsung alone. True, I may be coming down strongly on them here – but this is not to say that other corporates do not indulge in such practices. Or even that they do. It is all about good and bad practice - and could happen to any company.

While on this, I find some arguments rather absurd. If you question one company’s dodgy practice, you find comments saying “yes, but X company also does it. Actually everybody is doing it”. As if that sort of legitimizes that behavior!

I also came across comments blaming the blogger, saying he should have “expected” to be promoting Samsung onsite seeing as they were sponsoring his trip. The “no such thing as a free lunch” argument. I don’t agree with this because he did make it clear upfront what he expected his role to be. If Samsung was ok with this, how can the blogger be blamed?

I just think in this very dog-eats-dog world, one can never be too careful about intentions of the other party one is dealing with. However “big” or “reputed” that party is.

We sometimes tend to equate company size, image, products and global presence with integrity. Big companies LOVE that we do this - but we should know that they are VERY different things! Surely we’ve seen enough examples in recent times to make us wary of corporations and their integrity?

Also, it is always better to be safe than sorry. Especially in business dealings. Get everything in black-and-white so that you have a case if somebody tries to use/abuse you. Sad, but that’s the world we live in – and we need to protect ourselves.

In this particular instance, I think what CJ could have done better (instead of just saying he wanted to go as "reporter" and not "promoter") is to ask Samsung to give him in writing what specific activities he'd need to do on their behalf. Like donning their uniform, attending their briefing session, representing them at their stall as their spokesperson. 

When you nail it down to this detail, you get a better sense of the whole picture, there is less room for assumptions and surprises, you can make a better call. (I think I read a comment on one of the blogs saying that Samsung does lay down, in detail, what they expect from “reporters” and “promoters”. Possibly, this was not shared with CJ. Maybe an oversight, maybe not.  It is not unusual that parties keep things vague, they obfuscate matters if it plays to their advantage.) 

A final note – SCREAM if you feel you’re being wronged. Corporates HATE negative publicity – their PR departments will go into overdrive to start damage-limitation and issue “appropriate messages” to social media. But deep down they know that the damage has been done already – and that is what we should make them realize. So that they pre-empt situations arising, they pre-empt bad practice, they weed out poor employees. Nothing like negative feedback to galvanise corporates, to keep them on their toes. And thankfully today we have social media to help us to reach the whole world with our voice. (One of course is better advised to use this medium only if there is a genuine case of injustice – otherwise this is a double-edged sword).

It is said that every cloud has a silver lining. That even from something bad, eventually something good does come out of it. If, from this sordid episode, there is a better awareness and understanding of how to deal with corporates (especially if you are just an individual), then I’d say some good HAS come out of this.

P.S: This piece may appear to be rather one-sided, or not “balanced” enough. It may look like I’m coming down rather heavily on Samsung and not enough on the blogger. That is deliberate. If somebody can put up a credible defence for Samsung in this matter, I’d be happy to reconsider my position. In the absence of such material, I’m sticking to my above take.

I’ve always believed that in most aspects of life, it is far more important to try to be FAIR than to be “balanced”. The job of a judge is to pass a FAIR judgment based on the evidence presented to him. If the evidence is overwhelmingly in favor of one party, it would be a poor judgment if, in the interest of “balance”, he patronises the other party. It would be unfair on the aggrieved party - and a lesson wouldn't be learnt by the offending party. The only balance a judge needs to ensure, in my opinion, is that both parties are given an equal opportunity to state their cases.

So, though I'm not a judge (I'm not even in that profession!), this is the principle I adopt in my thinking and writing. Yes, fairness is a matter of opinion, but then so is balance. So let’s leave the "balance" to our diets, our lifestyle and to our cricket/sports teams. 

Let's first try to be fair in what is often an unfair world.