VAT nonsense

The BJP has for a long time been dubbed a 8216;8216;traders8217; party8217;8217; mainly because its core political constituency in the ...

The BJP has for a long time been dubbed a 8216;8216;traders8217; party8217;8217; mainly because its core political constituency in the Hindi heartland was the trading community. However, as a party of government for half a decade, it has widened its support base and it would be unfair to continue to dub it a traders8217; party.

A range of economic and social groups have been supporting the party, including tribals in some regions. Hence, it would be particularly short-sighted for a party aspiring to emerge as a truly national party to succumb to the blackmail of its 8216;8216;core8217;8217; constituency.

That, however, is precisely what is happening on the issue of value-added taxation VAT. After so many state legislatures have passed the necessary legislation, after so many conferences of state finance ministers have voted in favour of it, after the Union finance minister set a deadline in his budget speech, duly endorsed by the Union cabinet, it is ridiculous for the BJP to now retreat on the implementation of VAT under political pressure from traders in the nation8217;s capital.

So blatant is the political blackmail that a senior BJP leader like Madanlal Khurana is openly sabotaging his own government8217;s economic policies. Under pressure from the Khurana campaign the Congress government in the state of Delhi has also backed off. So we now not only have the spectacle of some states supporting VAT and some not, but of the national leadership of all national parties supporting VAT with state leaders backing off!

The prime minister cannot allow this kind of drift in policy and political blackmail to get the better of fiscal management. He must discipline his own party8217;s leadership and secure a national consensus. The postponement of the implementation date from April 1 to June 1, 2003, was not a good idea.

With the politics of VAT not sorted out, firms and traders will continue to live in a world of uncertainty. The economic cost of this uncertainty over the past fortnight has been huge. Why does the government want this uncertainty to continue because if the postponement is due to political pressures, no one will believe in the June deadline.

It should either go ahead and introduce VAT now or convene a meeting of the National Development Council, get all-party support and go ahead. Changing administrative deadlines without securing political support will not help. India is one of the few members of WTO that still does not have a VAT in place. How long will the government remain a prisoner to a clutch of pampered vested interests?