The cyber tax conundrum
Source:The Indian express
Written by:SuranjaliTandon(policy professionaland columnist)
Topic in syllabus:Economy– taxation (GS-3)
Analysis about:This editorial talks about the digital service taxes – its scope, issues at national and international level.
- The taxation of digital companies has been a key concern for G20 countries.
- The agenda to reform international tax law so that digital companies are taxed where economic activities are carried out was formally framed within the OECD’s base erosion and profit shifting programme.
- Seven years since its inception, it is still work in progress. Worried they might cede their right to tax incomes, many countries have either proposed or implemented a digital services tax.
- India is amongst the first to have implemented an equalisation levy in 2016, which sought to tax payments made for online advertising services to a non-resident business by residents.
- In March 2020, it expanded the scope of the existing equalisation levy to a range of digital services that includes e-commerce platforms.
- Any payment made by non-residents in connection with an Indian user will now attract a 2 per cent levy.
- Such an approach is often viewed as contrary to the ethos of international agreements. However, the proliferation of digital service taxes (DSTs) is a symptom of the changing international economic order.
- Countries such as India which provide large markets for digital corporations seek a greater right to tax incomes.
Criticism of Indian digital service tax by U.S.:
- According to a report, India’s equalisation levy is unreasonable for its sudden implementation and retrospective application, and is discriminatory since of the 119 companies to which it is likely applicable, 72 per cent are US-based.
- It cannot be dismissed that the tax can result in over-taxation since the company will not be able to claim any credit for tax paid on Indian sales. the clarifications have not been made available. However, it is predominantly applicable to US companies since the market for digital services is dominated by US-based firms.
- The law itself in no way discriminates based on size of operations or nationality, and has no retrospective element.
- Any company that has a permanent residence in India is excluded since it is already subject to tax in India.
- Experts suggest that such taxes can be passed on to consumers. While the Indian customer may not pay this as a tax, this could mean higher prices, contrary to the claim that it taxes the company.
Necessity of the digital service tax:
- The core problem that the international tax reform seeks to address is that digital corporations, unlike their brick-and-mortar counterparts, can operate in a market without a physical presence.
- The current basis for taxing in a particular jurisdiction is a notion of fixed place of business.
- To overcome this challenge, countries suggested that a new basis to tax, say, the number of users in a country, could address the challenge to some extent.
- The EU and India were among the advocates of this approach. In 2018, India introduced the test for significant economic presence in the Income Tax Act.
- As countries calibrate their response to competing demands for sovereignty to tax, DST is an interim alternative outside tax treaties. It possesses the advantage of taxing incomes that currently escape tax and creates space to negotiate a final, overarching solution to this conundrum.
Removing the creases in housework valuation
Written by:Faizan Mustafa (Vice-Chancellor of NALSAR University of Law, Hyderabad.)
Topic in syllabus:Issues related to women, women empowerment(GS-1)
Analysis about:This editorial talks about why the work women perform for the family should be valued equally with men’s work during the continuance of marriage.
- We go a step ahead and glorifyour women as goddesses but denythem equal rights, and under thelatest Uttar Pradesh and MadhyaPradesh Ordinances, even theright to choose their spouses.
The burden on women:
- As in the 2011 Census, while 159.85 million women stated household work as their main occupation, a mere 5.79 men referred to it as their main occupation.
- Indian women spend 299 minutes a day on unpaid domestic services for household members, men spend just 97 minutes.
- A reportentitled ‘Women’s Economic Contribution through their UnpaidWork: A Case Study of India’
(2009) had estimated the economic value of services by women tobe to the tune of a whopping$612.8 billion annually.
Some uncomfortable judicial observations:
- In Arun Kumar Agrawal v. NationalInsurance Company (2010), the Supreme Court not only acknowledged the contribution of thehousewives as invaluable but alsoobserved that it cannot be computed in terms of money.
- Similar observations wererecently made in Rajendra Singh(2020). But then these cases dealt
with a limited question of compensation under the Motor VehiclesAct to calculate the compensation
for the death of homemakers, andnot the recognition of a wife’s rightin her husband’s income duringthe subsistence of marriage.
- Justice A.K. Ganguly in Arun KumarAgrawal (2010) referred to Census2001 that is carried out under anAct of Parliament and had categorised those who perform household duties — i.e. about 36 crore
women in India — as non-workersand clubbed them together withbeggars, prostitutes and prisoners
(who are not engaged in economically unproductive work).
Arguments in favour of compensating women for house work:
- Seventh century Islamic law clearlymandates husbands to pay wives ifthey decide to suckle their children and entitle them to spendcertain portions of husband’s money without his consent.
- Home and market for centurieswere considered as two distinctspheres. American feminist economist Nancy Folbre rightly remarked, “themoral elevation of the home wasaccompanied by the economic devaluation of the work performedthere”.
- The tendency of a “separate spheres” reasoning was thusto reinforce the legal ordering offamily life and justify a husband’scontrol of family assets.
- Since the economy of the household is generally as much thesource of family wealth as the labor and enterprise of man, therefore the wife should, during life,have the same control over thejoint earnings as per husband, andthe right to dispose at her death ofthe same proportion of it as he”.
What are the efforts in India so far?
- In India, the debate on jointproperty rights of married womenis not new though we still do not
have joint matrimonial propertylaw.
- A private member Billin 1994provided that a married womanshall be entitled to have an equalshare in the property of her husband from the date of her marriage and shall also be entitled todispose of her share in the property by way of sale, gift, mortgage,will or in any other manner whatsoever.
- But in 2010, even registration of the National HousewivesAssociation as a trade union wasdenied as domestic work wastreated as neither trade norindustry.
- The United Progressive Alliancegovernment, in 2012, had proposed to make it mandatory forhusbands to pay a monthly ‘salary’to their wives.
- Theterm ‘salary’ as monthly paymentis indeed problematic as it indicates an employeremployee relationship, i.e., a relationship of subordination with the employerhaving disciplinary control overthe employee. Wives do not deserve a master servantrelationship.(argument against)
The way forward:
- Matrimonial property laws do givewomen their share but only whenthe marital tie comes to an end.
The time has come to insist thatthe work women perform for thefamily should be valued equally
with men’s work during the continuance of marriage.
- If women become a little assertive, prenuptialmarriage agreements can easilysolve this problem with the insertion of the clause on wives’ right inhusband’s earnings and propertiesbeing included in suchagreements.
True empowerment of the electricity consumer
Written by:Manabika Mandal &Sreekumar Nhalur
Topic in syllabus:Economy(GS-3) | Governance – Consumer protection
Analysis about:This editorial talks about issues associated with recent Electricity rules,2020.
- Did electricity consumers truly get “empowered” this December? This was theclaim of the Union Power Ministryas the “Electricity (Rights of Consumers) Rules, 2020 was promulgated in December, almost twoyears since the declaration of universal electrification.
- There are many issues related to these new provisions, they are discussed below:
Issue of supply quality:
- Many States have not been able toprovide quality supply, especiallyto rural and small electricity consumers. The enactment of consumer centric rules does spark public debate that brings the rights of
consumers to the fore.
- In this vein,the Rules lay an emphasis on national minimum standards for theperformance parameters of electricity distribution companies(DISCOMs), without urban ruraldistinction, especially for new
connections, metering and billing.
- It needs to be recognisedthat providing quality supply isprimarily the responsibility ofStates and DISCOMs. Similar (orbetter) provisions by various StateElectricity Regulatory Commissions (SERCs) already exist in theStandards of Performance (SoP)regulations. Such regulations havebeen in place for two decades inmost States.
Lack of accountability:
- It is not because of a lack of rulesor regulations that quality supplyis not provided; rather, it is on account of a lack of accountabilitysystems to enforce them.
- Guarantee of round the clocksupply is a provision that the Rulesemphasise, which might be missing in State regulations. But thereare doubts on the efficacy of automatic compensation payments towards such a guarantee. This is because the availability of powersupply is inadequately monitored.Hence, it isnot clear how the failure of powersupply is going to be recorded.
- Further, the Rules, in few cases, dilute progressive mechanisms that exist in State regulations.
- Consider the case of electricity meter related complaints. The Rules say that faulty meters should be tested within 30 days of receipt of a complaint. Compared to this, regulations that were published as early as 2004, 2007 and 2012 in Andhra Pradesh, Bihar, and Madhya Pradesh, respectively, say that such testing needs to be conducted within seven days.
- The Rules saythat the forum — constituted to remedy complaints against DISCOMs as per existing laws and regulations — should be headed by asenior officer of the company. Thisis a regressive provision thatwould reduce the number of casesthat are decided in favour of consumers, thereby eroding its credibility.
- State regulations in Delhihave different eligibility criteria,strictly mentioning that a DISCOMemployee, who was in service inthe last two years, cannot be appointed as a forum member. Maharashtra, Telangana and Bihar,among others, have the option ofappointing a retired senior judicialofficer or other independentmembers as the chairperson.
- The Rules are not forward looking either, given the government’sintent to promote rooftop solar
They guarantee net metering for a solar rooftop unit lessthan 10 kW, but there is no clarity
if those above 10 kW can also availnet metering. This could lead to achange in regulations in many
States based on their own interpretations.
- The possible litigation that followswould be detrimental to investments in rooftop solar units, andwould discourage medium andlarge consumers to opt for an environment friendly, cost-effectiveoption.
What is the way forward?
- A useful way to protect consumers would be to nudge SERCs to assess the SoP reports of DISCOMs and revise their regulations more frequently. Also, SERCs should organise public processes to help consumers raise their concerns.
- DISCOMs could be directed to ensure automatic metering at least at the 11 kV feeder level, making this data available online. The Forum of Regulators — a central collective of SERCs — could come up with updated model SoP regulations.
- The Central Electricity Authority of India could be directed to collect supply quality data from DISCOMs, publicly host them on online portals and prepare analysis reports. Such effortsneed to go beyond the quality of information that is currently hosted on portals such as the National Power Portal.
- The central governmentcould disburse funds for financialassistance programmes based onaudited SoP reports.With a focused onetime effort,electrification drives could provide connections across the country. But ensuring round the clocksupply will require continuous efforts.