In the debate on the structure and purview of the centralised Goods and Services Tax (GST), a sub panel of the Empowered Committee of State Finance Ministers -- an apex body that resolves all economic matters of the centre and state – is lobbying to keep alcohol out of the net.
The Indian constitution assigns to the states the responsibilty of prohibition through tax. Consequently states, on average, tax 30-32 per cent on alcohol sales. Coupled with manufacturing and distribution licence fees, in a country that annually produces as much as 2,300 million litres of alcohol, revenues from alcohol is not petty cash.
Under GST – currently discussed to be around 16 per cent -- alcohol will be cheaper for the consumers, which is not advisable since it is a demerit good. But the GST would also require states to split the revenue with the centre. "State governments conceptually don't want to share revenues with the centre," says Uday Pimprikar, partner at Ernst & Young.
Whatever the motivation, the sub-panels efforts if realised, will result in a rare practical case of government's financial well-being coinciding with public health.
Thursday, February 12, 2009
Taxing Matters
Thursday, February 5, 2009
Dr. Feelgood’s Absence
The unusually high demand for pills for depression at the on-site infirmary at the Davos Congress Centre – which hosted the 39th Annual Meeting of the World Economic Forum (WEF) – captures the mood of the event well: low-key and off-colour.
Political leaders instead of CEOs and financers held centre stage, with 40 heads of state -- twice the usual number -- attending the event. Klaus Schwab, WEF’s founder, adept at keeping his finger on the pulse, carefully adjusted the number of Hollywood celebrities invited, reducing the glam quotient while giving show business an Asian feel, represented by Jet Li and Amitabh Bachchan.
Discussions at the event revolved around how to deal with thecontinuing crisis rather than how to emerge from it -- countriesvoiced concerns that countries should agree on common standards forbank bail-outs. And a distinct policy vacuum was felt because of limited representation from US President Obama's new administration.
Chinese Premier Wen Jiabao made scathing comments about the “unsustainable model of development characterised by prolonged low savings and high consumption” practiced by some unnamed countries. Another other self-confident speech in the gloomy gathering was made by Russian Prime Minister Vladimir Putin: “Today, the pride of Wall Street – the investment banks – have practically ceased to exist. In one year they have had to declare losses which exceed their entire profits for the past quarter of a century.”
Bankers kept a very low profile. Josef Ackerman, chairman of Deutsche Bank moderated a panel discussion of central bankers, the new heavyweights in the finance universe. Bob Diamond, president of Barclays, didn’t show at a party he was due to co-host and Lloyd Blankfein, chief executive at Goldman Sachs visited crown Prince of Dubai Sheikh Hamdan in the Middle East instead. “In their absence all the world’s problems have been laid at their door,” says Sir Howard Davies, director of the London School of Economics.
It got sexist at points, too. “Would we be in this mess today if it had been Lehman Sisters?” asked the moderator at a panel discussion. Harvard economics professor Kenneth Rogoff remarked that it was German Chancellor Angela Merkel who called for transparency and regulation in financial markets 18 months ago; some men suggested the problem would have been averted since women would never have come up with those sophisticated tools.
But policy discussions regarding the financial crisis soon meandered, converting the WEF into a forum to gain political points. By walking away from a debate on the recent military campaign in Gaza with Israeli President Shimon Peres – he claimed his response time was curtailed – Turkish Prime Minister Recep Tayyip Erdogan became a hero in his country. Erdogan faces elections in March. Deputy Chairman of the unpolitical Planning Commission of India, Montek Singh Ahluwalia too didn't hesitate to use the international forum to promise goodies in the next budget if the UPA were voted back to power.
The irony in Gordon Brown’s statements didn’t g unnoticed, either. After decrying financial mercantilism – an addition to the vocabulary, like de-globalisation, at Davos this year – and preventing developing countries access to vital capital resources he called n the Royal Bank of Scotland to concentrate more on UK lending.
Even in the closing ceremonies, where a display of expectation is almost mandatory, there was little optimism this year. Everybody warned of the growing threat of protectionism. Kamal Nath, India’s minister for commerce and industry, blamed the US elections for impeding trade negotiations last year stating that while it affects US commerce, sensitive issues such as rice have implications of life and death in India.
Jamie Dimon of JP Morgan said something about policymakers in general that surmises this year’s meeting. “I haven’t yet seen people get all the right people in a room, close the damn door and come out with a solution.”
Political leaders instead of CEOs and financers held centre stage, with 40 heads of state -- twice the usual number -- attending the event. Klaus Schwab, WEF’s founder, adept at keeping his finger on the pulse, carefully adjusted the number of Hollywood celebrities invited, reducing the glam quotient while giving show business an Asian feel, represented by Jet Li and Amitabh Bachchan.
Discussions at the event revolved around how to deal with thecontinuing crisis rather than how to emerge from it -- countriesvoiced concerns that countries should agree on common standards forbank bail-outs. And a distinct policy vacuum was felt because of limited representation from US President Obama's new administration.
Chinese Premier Wen Jiabao made scathing comments about the “unsustainable model of development characterised by prolonged low savings and high consumption” practiced by some unnamed countries. Another other self-confident speech in the gloomy gathering was made by Russian Prime Minister Vladimir Putin: “Today, the pride of Wall Street – the investment banks – have practically ceased to exist. In one year they have had to declare losses which exceed their entire profits for the past quarter of a century.”
Bankers kept a very low profile. Josef Ackerman, chairman of Deutsche Bank moderated a panel discussion of central bankers, the new heavyweights in the finance universe. Bob Diamond, president of Barclays, didn’t show at a party he was due to co-host and Lloyd Blankfein, chief executive at Goldman Sachs visited crown Prince of Dubai Sheikh Hamdan in the Middle East instead. “In their absence all the world’s problems have been laid at their door,” says Sir Howard Davies, director of the London School of Economics.
It got sexist at points, too. “Would we be in this mess today if it had been Lehman Sisters?” asked the moderator at a panel discussion. Harvard economics professor Kenneth Rogoff remarked that it was German Chancellor Angela Merkel who called for transparency and regulation in financial markets 18 months ago; some men suggested the problem would have been averted since women would never have come up with those sophisticated tools.
But policy discussions regarding the financial crisis soon meandered, converting the WEF into a forum to gain political points. By walking away from a debate on the recent military campaign in Gaza with Israeli President Shimon Peres – he claimed his response time was curtailed – Turkish Prime Minister Recep Tayyip Erdogan became a hero in his country. Erdogan faces elections in March. Deputy Chairman of the unpolitical Planning Commission of India, Montek Singh Ahluwalia too didn't hesitate to use the international forum to promise goodies in the next budget if the UPA were voted back to power.
The irony in Gordon Brown’s statements didn’t g unnoticed, either. After decrying financial mercantilism – an addition to the vocabulary, like de-globalisation, at Davos this year – and preventing developing countries access to vital capital resources he called n the Royal Bank of Scotland to concentrate more on UK lending.
Even in the closing ceremonies, where a display of expectation is almost mandatory, there was little optimism this year. Everybody warned of the growing threat of protectionism. Kamal Nath, India’s minister for commerce and industry, blamed the US elections for impeding trade negotiations last year stating that while it affects US commerce, sensitive issues such as rice have implications of life and death in India.
Jamie Dimon of JP Morgan said something about policymakers in general that surmises this year’s meeting. “I haven’t yet seen people get all the right people in a room, close the damn door and come out with a solution.”
Friday, January 16, 2009
Exxon: Why the volte face now?
"A carbon tax strikes me as a more direct, a more transparent and a more effective approach (of countering global warming)," reads like just another line from the ongoing carbon tax versus cap-and-trade debate, except that it comes from Rex Tillerson, the CEO of Exxon-Mobil, the largest oil company in the world. For decades Exxon – which Greenpeace has called Climate Criminal no.1 -- has denied the existence of man-made global warming and has poured millions into at least 124 organisations that lobby against the idea.
Tillerson's change of stance reflects the changing political landscape in the US, and the growing support for action on climate change. So Exxon doesn't want to be an obvious target. But why support a carbon tax, and not the more widely accepted cap and trade system, which awaits approval by the US Congress?
Nancy Pelosi, Speaker of the US House of Representatives, says she will not force the issue in the 111th Congress: "We won't go before we're ready." If the cap and trade bill is passed now, it could raise coal-fuelled energy prices by 15 to 30 per cent, says Ben Jones assistant professor at Kellogg's School of Management: a politically difficult decision in a recession year.
"A carbon tax is a political poison pill," said Kert Davies, a research director at Greenpeace. "No politician would propose something with the word tax in it. Being in favour of something makes Exxon look like it is being intellectual, but this threatens to derail the prevailing international discussion."
And it protects Tillerson's job as chairman. He was challenged by the founding family of Exxon, the Rockefellers, which didn't like his earlier rubbishing attitude towards climate change. Senator Jay Rockefeller was, coincidentally, recently named as head of the Senate's Committee on Commerce, Science and Transportation.
With this speech, Tillerson might also have been more effective in increasing the life span of his core business by extending the debate on the switch over to alternate fuels, which his rivals espoused as early as 2002, and have advertised heavily. Seven per cent of British Petroleum's annual investments (amounting to $1.5bn) are in alternate energy – that includes natural gas; the number for Royal Dutch Shell is estimated to be about 10 per cent of its operations.
Tillerson is not alone in supporting the carbon tax. "Giving away allowances (under cap and trade) means that the government won't get the revenue it could otherwise use directly to fund climate initiatives," says Janet Milne, lawyer and professor at Vermont Law School. "Based on our experience with the European carbon trading programme, the value of theses free allowances translates to increased company profits but we can't assume the savings will be passed onto to customers."
But others disagree that a carbon tax will be better. "A cap and trade system promotes broad international participation," says George Wagner, economist at the Environmental Defense Fund in New York. "Developing countries would most surely be net sellers in the global carbon market – because of low cost abatement opportunities and since they are likely to receive more generous emissions targets than industrialized nations."
Neetu Goel, research associate at The Energy and Resources Institute (TERI) agrees with Wagner that a cap and trade system is most plausible for a country like India, "It will take a while before controlling carbon emissions becomes serious business in India and when it does merging within a global cap and trade framework will be best suited," she points out. Tillerson may have just put a tiger in his company’s growth tank, and a cat among the pigeons as well.
Tillerson's change of stance reflects the changing political landscape in the US, and the growing support for action on climate change. So Exxon doesn't want to be an obvious target. But why support a carbon tax, and not the more widely accepted cap and trade system, which awaits approval by the US Congress?
Nancy Pelosi, Speaker of the US House of Representatives, says she will not force the issue in the 111th Congress: "We won't go before we're ready." If the cap and trade bill is passed now, it could raise coal-fuelled energy prices by 15 to 30 per cent, says Ben Jones assistant professor at Kellogg's School of Management: a politically difficult decision in a recession year.
"A carbon tax is a political poison pill," said Kert Davies, a research director at Greenpeace. "No politician would propose something with the word tax in it. Being in favour of something makes Exxon look like it is being intellectual, but this threatens to derail the prevailing international discussion."
And it protects Tillerson's job as chairman. He was challenged by the founding family of Exxon, the Rockefellers, which didn't like his earlier rubbishing attitude towards climate change. Senator Jay Rockefeller was, coincidentally, recently named as head of the Senate's Committee on Commerce, Science and Transportation.
With this speech, Tillerson might also have been more effective in increasing the life span of his core business by extending the debate on the switch over to alternate fuels, which his rivals espoused as early as 2002, and have advertised heavily. Seven per cent of British Petroleum's annual investments (amounting to $1.5bn) are in alternate energy – that includes natural gas; the number for Royal Dutch Shell is estimated to be about 10 per cent of its operations.
Tillerson is not alone in supporting the carbon tax. "Giving away allowances (under cap and trade) means that the government won't get the revenue it could otherwise use directly to fund climate initiatives," says Janet Milne, lawyer and professor at Vermont Law School. "Based on our experience with the European carbon trading programme, the value of theses free allowances translates to increased company profits but we can't assume the savings will be passed onto to customers."
But others disagree that a carbon tax will be better. "A cap and trade system promotes broad international participation," says George Wagner, economist at the Environmental Defense Fund in New York. "Developing countries would most surely be net sellers in the global carbon market – because of low cost abatement opportunities and since they are likely to receive more generous emissions targets than industrialized nations."
Neetu Goel, research associate at The Energy and Resources Institute (TERI) agrees with Wagner that a cap and trade system is most plausible for a country like India, "It will take a while before controlling carbon emissions becomes serious business in India and when it does merging within a global cap and trade framework will be best suited," she points out. Tillerson may have just put a tiger in his company’s growth tank, and a cat among the pigeons as well.
Summary Judgement
Women are standing up – for merit. As the 108th Amendment Bill 2008, popularly known the Women's Reservation Bill – comes up for passage in parliament, several former women high court judges are stressing merit- rather than gender-based appointments for women in the judicial system. The Bill calls for a reservation of 33 per cent for women across all fields. Much applauded by politicians as a move towards liberalisation of women, the Bill is now being challenged – by women.
Of 603 high court judges, 42 are women, ranking India lower than most countries – 30 per cent of Canadian federal court judges are women. The Parliamentary Standing Committee on Personnel, Public Grievance, Law and Justice has claimed that "the judiciary is unable to comprehend the social flavor of legislation" since it has inadequate representation from "weaker sections" of the society – including women.
True, there are fewer women judges today, but that’s because fewer women took to the legal profession until recently. Women judges are sticking by merit-based appointments citing the changing landscape; the proportion of women in lower courts is increasing, and more girls are now opting for law school. Thus the argument for equal opportunity rather than gender equality.
Of 603 high court judges, 42 are women, ranking India lower than most countries – 30 per cent of Canadian federal court judges are women. The Parliamentary Standing Committee on Personnel, Public Grievance, Law and Justice has claimed that "the judiciary is unable to comprehend the social flavor of legislation" since it has inadequate representation from "weaker sections" of the society – including women.
True, there are fewer women judges today, but that’s because fewer women took to the legal profession until recently. Women judges are sticking by merit-based appointments citing the changing landscape; the proportion of women in lower courts is increasing, and more girls are now opting for law school. Thus the argument for equal opportunity rather than gender equality.
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