Posted by : Sainadh Reddy Tuesday, 11 June 2013
Swadeshi Jagaran Manch
Sector-8, R.K. Puram,
New Delhi Ph. 011-26184595,
Resolution passed in National Working Committee meeting held on 10th February 2013
Implement GAAR immediately
The Government of India is facing two kinds of financial deficits, namely, Fiscal Deficit and Current Account Deficit (CAD). Fiscal deficit is because of expanding public expenditure and inadequate public revenue. CAD is due to growing expenditure of for exchange and inadequate inflow of foreign exchange. The fiscal deficit of the central government has reached 6.0% of GDP, which is very high. The Finance Minister is taking a number of measures such as cutting down subsidy of diesel, and petrol for reducing the fiscal deficit. In the forthcoming budget 2013-14 he is expected to cut down, government expenditure on MGNAREGA, Health, Education and such other social welfare measures. Thus the burden of reducing fiscal deficit is conveniently transferred to the shoulders of the common man, who is already suffering from high inflation and shooting cost of living.
But the tragedy is that the same Finance Minister is stoutly refusing to take action on the MNCs who are cheating the nation every year by avoiding payment of crores of rupees of capital Gains Tax. They have been doing this by misusing double tax avoidance agreements (DTAAs), which the government of India has signed with several countries. The most notorious of such DTAAs is the DTAA with Mauritius. According to this agreement, companies registered in Mauritius, may invest their capital in India. They will be required to pay capital gains tax in Mauritius and not in India. But there is no capital gains tax in Mauritius. Thus Mauritius registered companies investing in India can totally avoid the payment of capital gains tax on capital gains made by them in India.
This facility is totally misused by MNCs of many western countries by routing their investments in India through shell companies (fake companies) registered in Mauritius, which is a poor island country. 40% of foreign capital coming to India comes through Mauritius registered fake companies. It is estimated that the India is losing about $ 80 billion of tax revenue annually due to DTA A with Mauritius. If this one loophole is plugged India’s fiscal deficit can be easily solved without imposing any burden on the common man. But our Financial Minister P. Chidambaram is not prepared for this. There are several such DTAAs that India has signed which are less harmful but still dangerous.
It is on account of the misuse of our DTAA with Mauritius that the British telecom company Vodafone successfully duped the Govt. of India, payment of capital gains tax to the extent of Rs. 11,200 crores, which was due by the Vodafone on account of its buying stakes of ESSAR company in the ESSAR-Hutchison company of India. There are several such instances of misuse of DTAAs by MNCs for the purpose of tax avoidance which is illegal.
Sri Pranab Mukherjee, who was the Finance Minister in 2011-12 declared in his speech presenting the budget for 2012-13, that general anti avoidance Rules, (GAAR ) would be adopted by the govt. which would enable the government to plug all such loop holes and GAAR would have retrospective effect. The parliament also passed the GAAR.
However P. Chidambaram who succeeded as Finance Minister on the election of Pranab Mukherjee as the president of India, did not want to implement GAAR which would have benefited the country’s revenue and foreign exchange to a great extent, and restrained the MNCS.
By appointing a pliable Parthasarthy Shome committee on the implementation of GAAR, P Chidambram has succeeded in postponing the GAAR to 2016. He is claiming that the ‘Ghost’ of GAAR is buried. Thus P Chidambram has killed a golden opportunity to reign in MNCs and to collect billions of dollars of legitimate tax due from them.
Pro-corporate and anti people P Chidambram has preferred to punish the common man with subsidy reduction and cut in social welfare expenditures and to allow MNCs like Vodafone to loot the nation every year and still go scot free. Swadeshi Jagaran Manch vehemently condemns Finance Minister for this anti-nation and anti people decision and demands the immediate implementation of GAAR. SJM further demands that the notorious DTAA with Mauritius be scraped forth with.
---Dr. Ashwani Mahajan
All India Spokesperson 9212209090