Thursday, November 05, 2015

Lunacy in Tax Policy: Super Gains Tax now suspended ?

The PM has apparently made a statement that the recently imposed Super Gains Tax is to be suspended; just hours after the Finance Minister boasted that the tax would raise Rs.65bn.

What on earth is going on?

The Super Gains Tax, a one-off 25% additional tax (ie over and above normal income tax) imposed on an individual  or a company that reports a profit in excess of Rs.2bn for the year of assessment commencing 1st April 2013.

This was first announced, to widespread dismay, in the mini budget of 29th January 2015. Fortunately, the Government was unable to pass the bill in parliament so the tax did not become law.

Following the August parliamentary election, the Government followed the bad practice of the past and 'bought over' a score of opposition MP's by offering them cabinet portfolios, saddling the country with yet another jumbo cabinet.

Using its captive majority, the Government passed the Super Gains Tax bill on the 20th of October. Two weeks later the PM has a sudden change of heart and claims that the Super Gains Tax will be suspended.

It seems that the laws of the land are dependent more on the whims of individuals than any sort of process, a truly disturbing situation.

To begin with policy making should not be in the manner of a conjurer pulling rabbits out of a hat but needs to follow a process of Green Papers and White Papers, as in the UK. 

Green Papers set out for discussion, proposals which are still at a formative stage. Once a firmer set of principles are agreed on, White Papers are issued by the Government as statements of policy, and often set out proposals for legislative changes, which may be debated before a Bill is introduced. Some White Papers may invite comments.

It is also important that the parliament be allowed to play its proper role to debate and discuss legislation. Buying over MP's needs to stop. Otherwise we end up with worthies such as Sir Joseph Porter in H.M.S Pinafore who boasted that:

I  always voted at my party's call,
And I never thought of thinking for myself at all.
I thought so little, they rewarded me
By making me the Ruler of the Queen's Navee!
I could go on in the vein for some length, there is so much wrong with the process that I don't even know where to begin. Stupidity does not even begin to describe the situation.

We expected much from this Government in terms of  restoration of process and procedure. This looks unlikely now.

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