Matru depicts the real India

January 23rd, 2013

India has often been described as an economy which is fast moving towards capitalism with a socialistic backdrop. Edward Luce in his book “Inspite of Gods” has rightly remarked that “India’s economy offers a schizophrenic glimpse of a high-tech 21st century future amid a distressingly medieval past.”

The quotation above sums up the theme of the latest release from the Vishal Bharadwaj stable - Matru Ki Bijli Ka Mandola.  The film has aptly captured the great Indian paradox – the continued coexistence of capitalist ambitions and social relations along side a predominantly non industrial agrarian based economy. Of course the quintessential Indian politician continues to play a corrupt role in this evolving interplay of the economic models. The movie very beautifully depicts all these underlying realities of the country.

Pankaj Kapur, representing the rich has a socialist heart but a mind of a capitalist. Under the influence of alcohol, his heart rules and he leads the poor farmers, in a protest march against himself. The moment the influence of alcohol recedes, his capitalist mind starts ruling his actions and he fires on the same protestors to disperse them. Does this mean that all capitalists are socialists at heart?

Imran Khan plays the JNU educated modern Indian youth who leads the farmers against the land acquisition plans of Pankaj Kapur. While doing so he manages to camouflage his real identity and guides the villagers by dropping pamphlets under the assumed name of Mao. This is good news for the Left leaders in India as he has been portrayed as a savior of the villagers.

In his effort to save the villagers, he does not mind going to a rich industrialist with a request to buy the produce of the farmers. This clearly indicates that both sides need each other to survive and thrive. A lesson which the Indian Left should learn and appreciate.

Shabana Azmi plays a greedy politician who does not mind compromising on any principles as long as she is able to achieve her goal – wealth accumulation. The politician does not understand what is good or bad for the people but clearly understands her goal of wealth accumulation and does not mind to use her office for goal fulfillment.

The end of the movie is a dream which most Indians would love to see transform into reality. The capitalist allows his heart to rule and he embraces socialism and of course the corrupt politician is thrown out of the scene.

Ah I wish the Indian politicians watch the movie and realize what they are in for.

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Should death be taxed?

January 14th, 2013

The inheritance tax, which was abolished in India in 1985, now seems to be making a comeback. At least, that is what we understand from the whispers emanating from the corridors of the finance ministry.

A large number of countries are facing fiscal problems and India is no different. Having failed in numerous attempts to raise tax revenues, governments in the UK, US, Germany, Italy and elsewhere are looking at inheritance tax as a measure to claw their way out of recession. India, it seems, may want to follow suit. However, there are large differences in the structure of those economies as compared to India. As a result of these differences, it would be wrong to introduce inheritance tax in India without a proper study and debate on the subject.

The first point that goes against the re-introduction of inheritance tax is the existence of a large proportion of the GDP in the form of a shadow economy (parts of the economy which are not reported for the purposes of GDP computation and also for the purposes of tax payments). According to World Bank estimates made in 2007, the average size of the shadow economy in majority of the OECD countries as a percentage of their GDP was below 15% where as in India it was 26%. This clearly indicates that the OECD countries stand to gain very little even if they widen their tax bases. While in India with such a large amount of GDP going unreported and untaxed, it would make sense to evolve measures to tax the living rather than the dead.

The other point that goes against the re-introduction of the tax is that it goes hand in hand with gift tax. India has long abolished gift tax and has introduced changes in the Income Tax Act, 1961 to tax gifts. If and when the inheritance tax is re-introduced, the current provisions with respect to taxation of gifts will have to be revisited. Inheritance is nothing but a form of gift and the taxation of two cannot be very different.

The third and the final point is that in a country where a taxpayer pays tax during his lifetime on the wealth that has been accumulated (under the Wealth Tax Act) should there be a tax on the wealth again on his death? Or the best will be to increase the amount of wealth tax and ensure strict enforcement. Or else, to give a blanket exemption from inheritance tax to those assets which have suffered the brunt of wealth tax during the life of the owner. Serious issues to ponder on!

To end this on a lighter note, the only silver lining, as a lawyer friend of mine remarked, is that the imposition of the inheritance tax may act as deterrence to the large amount of litigation which the country has witnessed for inheritance some famous some not so famous. For this one we really need to wait and watch.

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