ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles By M Govinda Rao

Taxes and Death Are Inevitable, but GAAR Is Avoidable

The report of the committee to review the introduction to the General Anti-Avoidance Rules gives the impression that it fi rst decided on a postponement and then looked for a rationale for the recommended delay. While the report makes a strong case for protecting the interests of foreign investors, it does not clarify how their interests align with those of India. For some reason, the report does not seem to refl ect on the interests of India or even if it does, it assumes that a tax policy which has been drafted in India goes against the interests of India and Indians!

Stimulus, Recovery and Exit Policy: G20 Experience and Indian Strategy

There are large variations among the g20 countries in their deceleration experiences, transmission mechanisms and their current macroeconomic outlook. In an integrated global economy, it is essential that the major economies coordinate their policies. But coordination does not imply simultaneous stimulus withdrawal from all g20 countries. Indeed, a phased withdrawal is probably the best guarantee against the risk of a negative global shock leading to another recession in the event of a simultaneous stimulus withdrawal from all g20 countries. Hence, this paper argues that each country needs to set the timing, scale and composition of its stimulus withdrawal keeping in mind its own macroeconomic outlook.

Goods and Services Tax: A Gorilla, Chimpanzee or a Genus Like 'Primates'?

Introduction of goods and services tax in India will be a win-win strategy for both the centre and the states and there is every reason to embrace it. However, reform of this nature involving both the centre and the states is an experiment in cooperative federalism and requires stewardship by statesmen. Resumption of GST reform requires greater recognition of and sensitivity to the views of the states. The IMF-type "one size fi ts all" reform, as has been recommended by the Thirteenth Finance Commission, could simply stall the process. At the same time, while it is legitimate for the states to bargain to retain their fi scal autonomy, they should not use this autonomy to indulge in predatory competition and export the tax burden to non-residents.

The 13th Finance Commission's Report: Conundrum in Conditionalities

Critically appraising the recommendations of the Thirteenth Finance Commission, this paper points out that despite some tinkering with one of the indicators, its approach to tax devolution suffers from the same limitations as those of earlier commissions. More alarmingly, the inability to offset the fiscal disabilities of the states has led it to recommend as many as 12 different types of grants with a host of conditionalities. There are serious questions over the design and implementation of these conditions, in addition to monitoring compliance. Besides, the commission's recommendations on the goods and services tax have been resented by the states and this has actually taken the reform agenda backwards. All this lends weight to the suspicion that yet another opportunity to reform the transfer system has been lost.

Goods and Services Tax: Some Progress towards Clarity

The first discussion paper on Goods and Services Tax released by the Empowered Committee is an important step in signalling the consensus and commitment to harmonise the indirect taxes levied by the states and the centre and in traversing some distance in clarifying the design and implementation aspects of the new tax regime. The efforts of the EC must be complimented for building a consensus on many a contentious issue in the process of evolving the GST in the country. However, much more remains to be done, many of the design and implementation issues are yet to be negotiated and settled and it would take considerable time and effort before they are finalised.

Direct Taxes Code: Need for Greater Reflection

A new tax code that overhauls the complexities that have emerged in the Income Tax Act of 1961 has been long overdue. The draft Direct Taxes Code put out by the Finance Ministry for discussion and comment does just that in a number of areas. At the same time questions must be posed of the sweeping reduction in rates and restructuring of slabs in income tax, which are likely to rob the exchequer of a significant amount of income. Questions must also be asked of the proposed taxation of not-for-profit organisations.

Fiscal Space for Achieving the Millennium Development Goals and Implementing the Tenth Plan in Bhutan

The paper addresses the issue of financing the achievement of the Millennium Development Goals in a sustainable manner in a small, low income and landlocked country, the example being Bhutan. The analysis shows that although mdg financing is nested within the plan outlay, significant efforts will be needed to ensure adequate resources for financing the plan and smoothening the wide year-to-year fluctuations in revenues and expenditure flows. The paper explores the availability of additional fiscal space using the fiscal diamond framework to identify policy and institutional reforms needed for raising revenues from tax and non-tax sources, improving productivity from public spending through reprioritisation, accessing external grants and borrowing from domestic and foreign sources.

The Fiscal Situation and a Reform Agenda for the New Government

The fiscal situation of the central government is worrisome. The problem is largely structural and not cyclical. Indeed, the slowdown of the economy has only partly contributed to the deterioration in 2008-09. The new government at the centre is faced with the formidable challenge of containing the worrisome fiscal deficit, while continuing to provide a stimulus necessary to revive the economy. It also has to institute a restructuring programme towards achieving fiscal consolidation in the medium term. Such a programme should draw lessons from the past and design a plan for the centre as well as the states.