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Low arousal Indians endure injustice & unfairness with feudalistic servility & fatalistic resignation said Palkhiwala

             The record number of 113 clauses of the Finance Bill, 2012, proposing a plethora of amendments in Direct Taxes and so many of them even with retrospective effect, reminds me of the unforgettable words of my Budget Guru and India’s legendary jurist and tax expert the Late Nani Palkhiwala, through which he had aptly analyzed the maddening malady of legislative amendments that has grappled our nation.  

             “The tragedy of India is the tragedy of waste – waste of national time, energy and manpower. Tens of millions of man-hours, crammed with intelligence and knowledge of tax gatherers, tax-payers and tax advisers are squandered every year in grappling with the torrential spate of mindless amendments. The cardinal error of our times is to mistake amendment for improvement and change for progress. The Finance Ministry has become almost pathological in its ‘change mania.’ A stable fiscal policy is to a nation what a stable family life is to an individual. But stability is anathema to the North Block,” Nani sadly lamented.


               Amongst the most controversial amendments of the Finance Bill, 2012 are the proposals to tax retrospectively merger and acquisition deals involving Indian assets, treat computer software sales as royalties and satellite transmission as a process for tax purposes. Infact, for the first time ever, India’s budget proposals have invited global flak and ire, with both British Chancellor of Exchequer George Osborne and US Treasury Secretary Timothy Geithner having expressed their strong resentment against these mischievous amendments and also pointing out to the FM that this raised grave questions about India’s credibility in the minds of foreign investors.

               In a lame defence, on 20th April, 2012, the Ministry of Finance has issued an official clarification in this regard contending that the retrospective changes proposed are ‘not substantive but clarificatory in nature’ and only ‘reiterated the intent of the legislation.’  This logic is virtually impossible to digest. Just imagine!  The amendments relating to M & A deals overseas, computer software and satellite transmission have been dated back with effect from 1st April, 1962 and 1st June, 1976, an era, when no such things ever existed in India.

              Isn’t it naïve on the part of the Ministry to claim that taxing these items, way back some 36 or 50 years ago (when their very existence could not be even contemplated), was the legislative intent then? Isn’t it true that what is claimed as being merely clarificatory is nothing, but a vindictive backlash against the series of judicial pronouncements of the Apex Court that have come to be delivered against the revenue? By this stretch of logic, some day the Indian bureaucrats may amend our tax law to provide, that any income earned from the sale of Indian recipes such as navratan curry, chaat masala, dosa or biriyani, anywhere in the world would be deemed to be taxable in India.

                  In the words of Palkhiwala again, “Legislative work expands so as to fill the time available for its completion. This is a branch of Parkinson’s Law and its operation has caused Parkinson’s disease in the body of our fiscal code. The avalanche of ill-conceived changes and complications, which may be compendiously called ‘legal litter’, is mainly responsible for the poor quality of our tart administration. Taxes are the life-blood of any government, but it cannot be over-emphasized that the blood is taken from the arteries of the tax-payers and, therefore, the transfusion has to be accomplished with the principles of justice and fair play.”


              G. K. Chesterton, in his brilliant essay ‘The Mad Official,’ has analyzed how a society goes mad. The rot begins when wild actions are received calmly by society. “These are people that have lost the power of astonishment at their own actions. When they give birth to a fantastic passion or foolish law, they do not start or stare at the monster they have brought forth. These nations are really in danger of going off their heads en masse, of becoming one vast vision of imbecility.”  India is one such country in respect of budgeting and fiscal laws. Today the monster of our direct tax structure has become more monstrous than ever before.

                  In this context, Nani’s quote hereunder is so meaningful indeed. “Two things strike the student of Indian income-tax law with trepidation and amazement – the precipitate and chronic tinkering with the law by bureaucrats, who are the unacknowledged legislators of India, and the anaesthetized patience of the Indian public.”

             How correctly did he evaluate our enduring power when he quipped, “Truly, we Indians are a ‘low arousal’ people. We endure injustice and unfairness with feudalistic servility and fatalistic resignation. The poor of India endure inhuman conditions which would have led to a bloody revolution in any other country. The rich endure foolish laws and unending amendments, which benefit none except the legal and accountancy profession, and instinctively prefer to circumvent the law rather than to fight for its repeal.”

                “India is waiting for a Finance Minister, who will have the courage, caliber and vision to put a stop to the maddening instability of our income-tax law,” prayed Nani Palkhiwala in 1991. The search still continues, even 21 years since then!

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