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Journalism of Courage
Shome panel underlines need for predictability and efficiency in tax law and administration
The recommendations of the Parthasarathi Shome committee on the controversial general anti-avoidance tax rules GAAR build on a premise few governments in India have acknowledged: India is a relatively high-cost economy to do business in compared to other emerging markets,both because of higher interest rates and outdated labour laws. In the absence of cheap capital or labour,therefore,the economy can ill afford to play around with its tax rules to create yet more hurdles for investors. The misplaced zeal to tweak tax laws to chase chimeras like the unearthing of black money has sometimes made fiscal provisions arbitrary. Worse,it has provided tax-haven-like advantages to those who could play the game. In this scenario,Budget 2012-13 stands out as Indias first budget that has had to be entirely rewritten within the year.
The committees recommendations herald significant changes that will create an impact only when the government implements them. Also,in the short term,it is unlikely that the flow of investments into the Indian economy will show a rapid upswing. The impact of the tax-related apprehensions unleashed by this years budget will take time to subside,and globally,money is scared to move to any destination where tax laws change fast. But the report provides a good base to announce a schedule for the implementation of the delayed Direct Tax Code,if not for the Goods and Services Tax as well.
