India’s tax regime seems to be stuck in a time warp. The more the government tries to reform it the more complicated it becomes and the outcome leaves a lot to be desired. There are a multitude of exemptions with their corresponding pre-conditions which provide enough loopholes to enable unscrupulous people to take advantage of them. Exemptions are meant to protect the poor/ weak whether they are individuals or companies or to encourage activities which are desirable. But in most cases the exemptions are availed either by the wrong people or they continue well beyond their intended life. Here are some examples of these instances
Charitable institutions
A noble thought indeed. Why should charitable institutions which are meant to serve society at large be made to pay tax? Afterall they are non-profit making organisations. Whatever money they make is given back to society. Seems fair enough. But look at the kind of organisations claiming to be ‘charitable’. I was amused to read the other day that BCCI is a charitable organisation. It made a profit of hundred of crores of rupees from the IPL. What charity has it done? And Mr Lalit Modi has the audacity to claim they should not be taxed as all the money will be distributed to the state associations. What convoluted logic!!! By that logic companies also should not be taxed as they distribute the profits to shareholders :D
Agriculture
Agricultural income is exempt from tax. It does not matter whether the farmer has one acre of land from which he ekes out a hand-to-mouth existence, and would fall in the exemption limits, or he has hundreds of acres around which he drives a Merc. There is absolutely no reason why a large farmer should not be made to pay tax yet no politician today has the guts to tax the big farmers simply because they would lose votes.
Income tax holiday
Industries got tax breaks in their initial years which is understandable. What is not acceptable is that even after they have grown into some of India’s largest and most profitable companies they clamour for the tax breaks to be continued. An example is IT companies. Their attitude is akin to the reservation policy. One you get it you don’t want to lose it. Incidentally they are at the first to say there should be no reservations in private sector.
DTAA
The big daddy of all tax anomalies. While the objective is right the implementation is totally flawed. Alongwith the foreign investors who ‘should’ be given tax breaks to invest in India we have many Indians taking advantage of these provisions. Firstly, there are Indian corporates who set up subsidiaries in tax havens like Mauritius and transfer money there. Then these subsidiaries invest in India and it is called FDI!!!! Then there are our politicians and businessmen who bring back their ill-gotten black money to India through a long chain of transactions involving Swiss banks and other crooks of the world. Then they either earn tax-free profits or sell their investments to the Indian promoters (read themselves) at a loss. And behold. The money is now white in the hands of the Indian promoter.
These are just a few instances. But look at these and you know why these loopholes won’t go away. Their beneficiaries are sitting right there in parliament
