Retrospective,retrograde

The economic reality is that private investment has slowed significantly over the last couple of years. His budget has done little to revive business sentiment. There is no pursuit of genuine fiscal consolidation through expenditure control. Neither is there any time frame to enact the two big reforms in taxation the Direct Taxes Code and the Goods and Services Tax. Woefully short on new ideas to generate additional resources,all that Mukherjee has done is to use his authority to tax as the tool for raising money. The budget proposes to let the taxman dig up cases as old as 16 years where individuals acquired foreign assets to ensure they were indeed assessed. Mukherjee also targeted the $11.076-billion Vodafone-Hutch transaction of February 2007. Finance ministry officials say the move will allow them to zero in on 35-40 other similar deals to raise a total of $10 billion or Rs50,000 crore,roughly equal to the bill for the job guarantee scheme for one year.

This comes when the finance ministry has already filed a review petition in the Supreme Court in February. Even before the Supreme Court decides on it,Mukherjee has thumbed his nose at the court by retrospectively introducing the amendments. The argument presented by the finance minister to justify his move was taken on board by the court when it held in January that Vodafone was not liable to pay the tax. The court clearly distinguished looking through the deal to reflect the intentions of the government from looking at the deal through the Income-Tax Act as it stands today. It also noted that the acquisition was neither a preordained one nor a sham transaction and the taxman cannot deny strategic tax planning by a company. In an interaction with newspapers on Sunday,Mukherjee admitted that retrospective amendments to fiscal legislation should not be done. Then why has he done it? He needs a more convincing answer for the court.