1. Tax reforms:
Context: India’s tax collection is set to declined sharply this year because of decline in national income and fall in employment due to covid-19.
Thus, fiscal deficit in the budget is set to rise unless other expenditures are cut, however there are committed expenditures which cannot be curtailed and the deficit in the budget is set to climb to new high for 2020 and 2021.
Taxpayers’ data:
- 15 million people pay Income Tax out of a population of more than 1.35 billion in 2018 -19 for 2019-20 number of taxpayers may be similar given that the economy was slowing down and unemployment was a record high.
- In 2020-21 the number would sharply drop due to the impact of covid-19 and massive unemployment in the organised sector
- Number of tax filers has increased but the number of taxpayers has dropped this is because of the tax Concession of offered in the budget those filing a return up to rupees 5 lakh to not have to pay tax.
- In 2012-13 year for which the government had released detail data in 2016 the number of effective taxpayers was 16 million
- So inspite of an increase in population and the laws introduced in last 6 years to bring the rich into the tax net, there has been little change in the number of taxpayers. The fact that the direct tax to GDP ratio in percentage terms is stagnating at about 5.5 % is another indication of this.
Why direct collection is less:
- There are two categories of the well off in the country one who file a tax return and two who completely escape The Tax net.
- If the former had declared more of their incomes the tax to GDP ratio would have risen ,
- If those outside the tax net had come into tax net and started filing the returns there would have been a rise both in tax to GDP ratio and number of taxpayers
- In 2016 a report says that the top ten percent of Indians earned 55% of the Nation’s income, if these people could be brought under the income tax net and they Pay their taxes honestly at current tax rates income tax to GDP ratio alone would have been about 18%
- Collection from other direct taxes like corporate tax and the figure could be more than 20%
- This does not take into account the black income generation in the country
- Clearly a lot of taxes are not paid out of white incomes and none of them from black income
Government efforts to increase tax to GDP ratio:
- Demonetisation that was supposed to bring out the black incomes and turn them white so that the tax to GDP ratio could rise sharply.
- The government made repeated announcements about how many more people had come into the tax net after demonetisation and about how more tax would be collected
- Unfortunately no such thing has happened.
- In 2014 the India set up a special investigation team under court order it renegotiated the tax treaty with Mauritius to get back to India the money held abroad but nothing seems to budge the rich to pay more tax and the rich are fleeing the country, more than 23000 high net worth individuals left the country in 5 years up to 2019.
- A considerable part of tax filing process of computerized when e-filing and earlier Pan were introduced these measure would make people to file honest Returns.
- Former finance minister Yashwant Sinha introduced the scheme of honouring honest taxpayers
- The vivad se Vishwas scheme was introduced to settle tax disputes, but none of these schemes seem to have delivered.
- In 2016 before demonetisation the government has initiated and income declaration scheme.
- After 1991 with new economic policies, controls and regulations were sharply curtailed- the monopolies and restrictive trade practices act the foreign exchange Regulation Act extra were removed but the well off have constantly complained that tax rates are high and there are too many controls that they pay all the taxes but get nothing in return, this lament is unfair since they have gained the most out of the country’s development.
2. Independent fiscal council:
Context: The fiscal situation in India has been under even severe stress even before covid-19 and the novel corona virus has only worsened it.
- The fiscal deficit of the centre in 2019-20 as estimated by the controller General of accounts was 4.6 %, 0.8% point higher than the revised estimate
- For the current year without any additional fiscal stimulus the the deficit is estimated at about 7% of GDP as against 3.5% estimated in the budget due to sharp decline in revenues
- The consolidated deficit of the Union and the states could be as high as 12% of GDP and the overall debt could go up to 85%
- Besides large deficits and debt, there are questions of comprehensiveness, transparency and accountability in the budgets
- The practice of repeated postponement of targets, timely non-settlement of bill payments and off budget financing to show lower deficits has been common.
- The report of CAG of India in 2018 on the compliance of the fiscal responsibility and budget management act for 2016-17 highlights various steps to keep the liabilities hidden, these include special banking arrangements for covering areas of fertilizer subsidy issuing short term bonds unsecured loans and borrowing from National Small savings fund by the Food Corporation of India towards meeting food subsidy, financing irrigation projects from the long-term irrigation fund created by NABARD and financing of railway Projects through borrowings from the Indian Railway Finance Corporation are few examples.
- To make the budgets comprehensive transparent and accountable the 13th finance commission recommended a committee appointed by the Ministry of Finance which should eventually transform itself into a fiscal Council to conduct an annual independent public review of FRBM compliance including a review of the fiscal impact of policy decisions on the FRBM road map.
Problems of the Council:
- The council which is created by finance minister and reporting to it can hardly be expected to be independent.
- The 14th finance commission recommended the establishment of an independent physical council which should be appointed by and reporting to Parliament by inserting a new section in the FRBM Act.
- Deputy Governor of RBI viral Acharya in his recent book quest for restoring financial stability in India also makes out a case for bipartisan independent fiscal Council.
What is an independent fiscal Council:
Independent physical institution which mandates to Promote stable and sustainable public finances.
OECD journal defines a fiscal Council as a publicly funded entity stuffed by non elected professionals mandated to provide non partition oversight of physical performance and advice and guidance from either positive or normative perspective on key aspects of fiscal policy
Performance of independent fiscal council in other countries:
- In Chile the existence of two independent bodies on GDP trend and reference copper price has greatly help to improve budget forecast.
- In UK office for budget responsibility has been important in restoring fiscal sustainability cross-country evidences shows that fiscal Council exert a strong influence on fiscal performance particularly when they have formal guarantees of independence.
OECD documented important principles of Fiscal council under 9 broadheads:
1. Local ownership
2. Independence and non partisanship
3. Mandate
4. Resources
5. Relationship with legislature
6. Access to information
7. Transparency
8. Communication
9. External evaluation
We need system and Institutions to ensure checks and balances,in that respect a fiscal Council is an important institution needed to complement the rule-based fiscal policy.
3. The DNA Technology (use and application) Regulation bill, 2019
Context: draft report of the parliamentary standing committee on science and technology headed by congress leader, Jairam Ramesh raised issues about the misuse of DNA bill.
DNA bill 2019:
The DNA Technology (Use and Application) Regulation Bill, 2019″ is for expanding the application of DNA-based forensic technologies to support and strengthen the justice delivery system of the country.
The utility of DNA based technologies for solving crimes, and to identify missing persons, is well recognized across the world.
The key components of this Bill include:
- Establishment of a DNA Regulatory Board;
- Accreditation of DNA laboratories undertaking DNA testing, analysing, etc.;
- Establishment of the National and Regional DNA Data Banks, as envisaged in the Bill, will assist in forensic investigations.
- This will aid in scientific up-gradation and streamlining of the DNA testing activities in the country with appropriate inputs from the DNA Regulatory Board which would be set up for the purpose.
By providing for the mandatory accreditation and regulation of DNA laboratories, the Bill seeks to ensure that with the proposed expanded use of this technology in this country, there is also the assurance that the DNA test results are reliable, and furthermore that the data remain protected from misuse or abuse in terms of the privacy rights of our citizens.
The proposed legislation will empower the criminal justice delivery system by enabling the application of DNA evidence, which is considered the gold standard in crime investigations
4. India’s longest passenger ropeway
- 1.8 to km bi-cable jig pack connects two ends of Brahmaputra River constructed in Guwahati in Assam.
- Passes over mid river peacock Island that houses umananda a middle Shiva temple
5. Hongkong reports its first viral Re infection
It was believed that once you are infected with corona virus you will not be re infected again as antibodies will be developed to fight the virus and you become immune.
So covid-19 may continue to spread among people despite herd immunity.
What is herd immunity?
Herd immunity is a stage of an epidemic in which some members of a population group remain protected from infection because a majority of those around them have already developed immunity, either through vaccination or because they have been infected earlier.
6. Type 054 class frigate
Context: China launches warship for Pakistan Navy
First of the four advanced level warship it is building for Pakistan Amit deepening defense ties between China and Pakistan .
Features: Type 054 class equipped with the latest surface, subsurface, anti-air weapons, combat management system and sensors.
7. G o a f e n –905 – optical Remote Sensing satellite
- Launched by China
- What is Remote Sensing satellite – sensing information from outside or from a distant position with no contact
8. Countering America’s adversaries through sanctions act (CAATSA)
- The countering America’s adversaries through sanctions act is a United states federal law that impose sanctions on Iran, North Korea and Russia.
- It includes sanctions against countries that engage in significant transactions with Russia’s defence in intelligence sectors.
- India could face US sanctions for purchasing high-value military defence items, in particular state of the art S 400 Triumph missile defence system from Russia under the act
- India is set to receive its first delivery of the system in 2020.
- S-400 is one of the world’s most advanced air defense system that can simultaneously track numerous incoming objects like aircraft missiles and you have in a radius of few hundred km and launch appropriate measures to neutralize them.