With two economic reformers - Manmohan Singh and P Chidambaram - at the helm and stern, we expected this budget from our FM to be music to our ears. But the jarring note was struck on February 28th , when the dream budget hit a few icebergs.
First shocker: Fringe Benifits tax covering the benifits enjoyed by employees in all but not traceable to a single employee. I wonder if internet connections for each employee belongs in this tax (whether I'm being pessimistic or just cynical, I don't know yet). The irony of the situation is that you can expect most companies to withdraw the benifits and blame it on the government (it's a win-win, you see), rather than pay the tax.
The One Two punch: Withdrawal Tax of 0.1 % on cash withdrawals from banks above the sum of 10,000 INR (convert).
The ostensible purpose of this is to reduce the cash based transactions in the country. The account payable checks and electronic money won't be affected. The black money and the black market won't be really be affected by this tax - they operate by Hawala channels where they pay ~0.25 % commision to the hawala operators. Truthfully this tax seems to be thrown in for the general effect - sort of to distract the public from the rest of the budget's power plays.
Final K.O with Value Added Tax. The intentions behind these are good in an economic ense - if the grain was taxed, the tax on the bread would be only for the value added. But the road to hell is paved with good intentions or so the saying goes. I have this faint cynical suspicion that this will end up being an excuse to drive up the price of commodities being traded across state borders. All the states accustomed to getting their full cut of taxes, will either institute an entry tax or maybe an exit tax as well. The concept may provide the rationalizations for the state to push their own Reforms into the mix. I might be pessimistic, but it doesn't look quite that bright for the consumer.
Onto Caesar what is Caesar's:
The budget is not without any redeeming qualities for the salaried class. The direct taxes have been cleaned up with a clear slab system without involving any imaginary numbers in the tax calculation. No more shuffling with tax rebates and investments which reduce both your income and income tax (surprise !!). The key concept here is that, the more forms you have to fill in, the probablility of you filling in all properly goes down and vice versa. QED (as any self respecting under graduate would have put it).
The gender inequality in the budget would have been controversial - but it is not , because it discriminates against men only (what do these people have AGAINST men ?). Well, if that sounded wierd, just add "wo" to the men and read it again. Coming from a matriarchal society, I find the idea of "We have to give women an unfair advantage to level the playing ground" repulsive to the core. If that becomes the accepted norm, then the feminists have lost (even though they won) - because it translates into "You didn't beat us, we let you win" from the male counterpart. It degrades the victories justly earned. Pardon my rants on this topic but - Nobody is more equal than others !.
Except for the few bits (or controversy-bait for the cynical), the budget is pretty much split between gender sensitivies, good intentions subverted and plain old power politics. Nothing for you to see here, move along.
