Shades of Gray

Recently, there has been quite an uproar about the implementation of Value Added Tax in India. Even before it was implemented from April 1, 2005, there were protests in all parts of the country by traders who were of the view that they won’t be able to sustain their business once VAT comes in force. Is it a truth or just a fallacy? One needs to closely examine VAT, its merits and demerits before drawing a conclusion.

Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods and services. It applies, in principle, to all commercial activities involving the production and distribution of goods and the provision of services. It is a consumption tax because it is borne ultimately by the final consumer.

Over 130 countries worldwide have introduced VAT over the past three decades and it raises nearly 27% of total tax revenue in those countries. It is a multi-stage tax, levied only on value added at each stage. The objective is to avoid ‘cascading’, which can have a snowballing effect on prices. It is assumed that due to cross-checking in a multi-staged tax, tax evasion will be checked, resulting in higher revenues to the government. Many sections hold the view that the trading community has been amongst the biggest offenders when it comes to evading taxes. If a well-administered system comes in, it will close avenues for traders and businessmen to evade paying taxes. They will also be compelled to keep proper records of their sales and purchases.

Industry watchers say that the VAT system, if enforced properly, forms part of the fiscal consolidation strategy for the country. It could, in fact, help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government. The International Monetary Fund (IMF), in its semi-annual World Economic Outlook released on April 9, expressed its concern over India’s large fiscal deficit – at 10 per cent of the GDP. If VAT could solve this problem, it will be a major step forward for the government.

Let us examine the advantages and disadvantages of this system. One particular advantage is that of the widening of the tax base by bringing all transactions into the tax net. VAT represents an important instrument against tax evasion and is superior to a business tax or a sales tax from the point of view of revenue security for three reasons. One way of tax evasion is by undervaluing the product. Under VAT, tax losses due to undervaluation should be limited to the value added at the last stage. Secondly, if payment of tax is successfully avoided at one stage nothing will be lost if it is picked up at a later stage. Even if it is not picked up subsequently, the government will at least have collected the VAT paid at stages previous to that at which the tax was avoided. For the same scenario under the current system of sales tax, which is collected only at one-point, all the taxes due on the product are lost. Another advantage is that VAT may be selectively applied to specific goods or business entities thereby granting exemption to essential goods and small-scale businesses.

A major disadvantage cited by those opposing VAT is that it places a special burden on tax administration. On examining this more deeply, one finds that it is not so. The consolidation and incorporation of numerous indirect taxes into the VAT would simplify the rate structure, tax base, and administration of the indirect tax system. Another reason given by the detractors is that VAT is inflationary . However, this can be offset by temporary price controls and a careful setting of the rate of VAT.

A rational analysis leads one to conclude that the mrits certainly outweight the possible demerits. Widening of tax base, checking tax evasion and the possibility of a decrease in fiscal deficit are reason enough to implement this structure which has already been successful in 70 % of the countries. Those who are opposing VAT are doing so only because they will no longer be able to dupe the tax authorities and fill their pockets. The government should overlook them and go ahead with nation-wide implementation.

Tiger, Tiger , Burning Bright
In the forests of the night,
What immortal hand or eye
Could frame thy fearful symmetry?

- William Blake

Welcome to the Jungle. The Tiger is India’s national animal and the jungle’s most secretive animal is in danger of extinction. The Sariska tiger reserve was set up in 1978 and massive poaching in the last two years has wiped out the entire tiger population.

Welcome to the Jungle.The Project Tiger was launched in 1973 to maitain a viable tiger population in the natural environment. In Sariska tiger reserve, 200 kms from the national capital, animal census will be carried out this month and it is believed that it will confirm a conservationist’s worst fears – no tigers in its 866 sq km of jungle.

• India has the world’s largest tiger population.
• 1500 tigers have been killed in India in the last 10 years
• At this rate, the Indian tiger will become extinct in 2020

Welcome to the Jungle. The situation is more of less the same in other tiger reserves across the country. In Manas, numbers have dropped from 125 in 1997 to 65. This brings the credibility of the annual tiger census and the efficiency of the Indian Forest Service into question. Many possible causes have been cited, with officials, ministers and experts naming their own scapegoats.

But time has come to face the reality and do something about it. The forest department is ill-equipped to prevent poaching. The staff is old and majority has not been trained to do their job effectively. For a revival, we need fresh recruitment of Forest Guards, something that has not happened since 1987. Latest scientific methods and digital technology should be employed to conduct tiger census – this will give credibility to the numbers churned out by the tiger reserve administration, which wildlife experts believe is a huge exaggeration. The local population should be involved in anti-poaching measures in national parks but at the same time, the administrators must be vigilant enough to ensure that the locals do not join hands with poachers who can lure them with handsome rewards.

While these measures can help us save our tiger population, we must act tough with the well-organized network of poachers. Poaching is illegal and should be made a non-bailable offence. Special wildlife courts should be set up to speed up trials and Capital punishment should be meted out to poachers as well as locals and forest staff who aid them. It will be a national shame if our national animal becomes extinct in the wild. Therefore, good management, proper enforcement and severe punishment are the need of the hour.

It is said that no one forgets his first sight of a tiger in the wild. If proper measures are not taken on a war-footing, future generations will never get a chance to see this magnificent animal. Only after the tigers are safe, it will be befitting to say ‘Welcome to the Jungle‘