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!!!

Aamir Khan's Satyamev Jayate

So I finally got to watch the first episode of Aamir Khan’s Satyamev Jayate just now. Yes, five days too late but better late than never. And now that I’ve seen it, I find myself competent to comment about it firsthand and not form an opinion based on others’ opinion of it.

It would be an understatement to say that I had seen a lot of Twitter buzz about the programme. There were lots and lots of tweets - during the programme, after the programme, people posting links of articles written right after the programme.

Most of this buzz was positive, ranging from mild enthusiasm to wild ecstasy. Many even said they finally found a reason to watch TV. A lot of the positive vibes came because people seemed to like the format and the way the whole programme was constructed.

It did seem to be extremely well-constructed. Right from the introduction of the programme and its goal, to the specific issue it was discussing, there seemed to be a sense of purpose about it.

This was not just sensationalism or random “breaking news”. This seemed to be about raising a serious issue in all its seriousness, supporting it with first-hand accounts, further supporting it with research and facts.

And, as if to drive home further the magnitude of the issue, the apathy and complicity of  the administration was also exposed.  The shocking story of doctors caught on camera discussing how to get rid of the foetus is one side of the story, the equally shocking other side is that no action has been taken against even one of these doctors (and there are 140 of them). And this, inspite of promises made by the Prime Minister of the country. And for good measure, the President too.

Every story tugged at one’s heart strings, every aspect of the programme either confirmed a suspicion or raised awareness. Yes, female foeticide is not just something that poor, uneducated people in villages do, it happens also amongst the urban, well-to-do, educated. Everybody who thinks a girl child is a curse – and this cuts across all classes of society.

Very importantly, the programme did not just stop at raising an issue. Yes, that in itself has value but it went further and tried to find solutions to the problem.  

The letter to the Rajasthan Chief Minister asking for the setting up of a Fast Track process in the cases against the doctors may appear symbolic but it could go far beyond just symbolism.  It could send out a message to indifferent and corrupt administrations across the country that a vehicle to demand change is being put in place – by the people the administration is responsible to. And this is being done in not just a peaceful manner but within the legal and democratic framework of the country.

Yes, I know I am jumping the gun here, this is just ONE letter to ONE administration – but I’d like to think this could be the start of something bigger, that this could set a chain of thought in process. This is not extra-constitutional (as far as I know) – it is just channeling of people power to demand action and change.  We all know that as individuals we feel extremely helpless in Indian society (unless you have money and/or influence, you are a nobody), but as a collective force, we may be able to bring about change. And that’s what this programme seemed to try to reinforce.

Anyway it’s very very early days yet – and it’s unfair to build such expectations from, what is essentially just a TV programme -  so I will try to keep myself grounded. And just say that at the very least, it seems to help raise awareness about an issue in a non-sensationalising and hard-hitting style. And as many have said, if this helps to save one more foetus, it would have already done good.

Fortunately I have a rather mixed bunch that I follow on Twitter, and so on most discussion items I get more than one side to the story. Just the way I like it.

I found a fair amount of criticism about the programme too. Most of the criticism could be bracketed under the following categories:


1. Yeah, so suddenly NOW we realize that we have a female foeticide issue in the country? We needed Aamir Khan to tell us that? 


2. Yeah, so you think just because Aamir Khan says this, the problem is going to get solved? How much such talk have we heard in the past and how many of those problems have been solved?


3. What? Aamir Khan’s getting 3 crore per episode (or whatever it is)?  For telling us our problems. Man, what suckers we are!


4. This female foeticide issue is an easy one for Aamir to take up. Let’s see him take up a more grey issue.


5. Star Plus may have hit a bonanza here but this is just showbiz, so let’s see it for what it is. And corporates need people’s goodwill so they will obviously align themselves with this sort of “social message” agenda.

I understand where each of these arguments is coming from - and will try to take them up one by one.

1. Yes, that female foeticide happens is not necessarily a revelation that is being brought to us only by this programme.  But I'm sure there are many who, even if they are aware it happens, must have been shocked by the numbers. And the research about it being an urban malaise too.

So let’s give the programme at least SOME credit for raising awareness – not everybody is as aware as the “intelligentsia” in this country. And yes, when Aamir Khan says it, it is more likely to be heard than just any Tom, Dick and Harry. That's the perk a celebrity has and a common man does not.

2. We, as a people, have been through (and are going through everyday) so much of credibility loss amongst institutions in the country that we’ve become a skeptical lot. We don’t trust anything or anybody anymore – not the government, not the media, not the corporates, not our celebrities.   We believe everybody has a hidden agenda. It is sad, but that is how it is. When all around you, you hear stories of scams, paid media, crony capitalism, a failed justice system  and what-have-you, you can be excused for being cynical.

I would just say, let’s for one moment put all our cynicism aside and give this programme a chance. Let’s not rubbish it before it’s even got a chance to develop roots. What’s the worst that can happen? That it becomes another farce of a programme and nothing comes out of it? Well, I sincerely hope it doesn’t go that way but if it does, surely that’s not the worst thing to happen to a TV programme.  I, for one, would still rather see this than most other stuff dished out nowadays on TV.

3. For those who talk about how much Aamir charges per episode, I have only this to say - what does it really matter? It is between him and the TV channel. It is not really our business. If we don’t like the programme, we can just switch off or switch to another channel.

4. As for those suggesting Aamir’s picked an easy issue this time, why not wait before drawing out those daggers? It’s way too early for them – let him first slip up on future issues before you thrust that dagger in. Ever heard of “benefit of doubt”?

5. And, finally, if Star Plus has hit a bonanza, so what? It’s the job of a channel to serve content to the public, sometimes it works, sometimes it doesn’t.  If this time it has worked – and just happens to be related to spreading social awareness amongst the public – surely that’s not a bad thing? I can think of programmes with far more damaging content that have been hugely successful commercially.

And if corporates support a social message initiative, hoping to garner public goodwill, so what? Surely there are worse ways for them to spend their money? 

All in all, I’m in the pro-SMJ camp at the moment. And those who know me, know that I am myself very cynical of a lot of things happening in India right now. But I’m not going to let my cynicism get the better of me on this one. Not for now at least.

So brushing aside cynics, I can only think that the only other constituency that would be against this SMJ initiative would be those with vested interests. Otherwise I can’t see people opposing this as such.

Anyway, let’s just hope there are concrete results to show on the ground for the activist steps at the end of the first episode. That will give a huge amount of credibility to the programme. I hope there will be mention of follow-up results of previous episodes, in future episodes.

One more thing. This programme needs to be localised, it needs to be done in regional languages because of the reach of regional TV. A lot of the Indian population watches only regional TV.

Looking forward to the next one. Yes, maybe finally, there IS a reason to switch on that TV.


P.S: Here's the video of the programme - episode 1 - for those who have not seen it yet, or would like to see it again.

http://www.youtube.com/watch?feature=player_embedded&v=NG3WygJmiVs