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What are those taxes for? PDF Print E-mail
Saturday, 19 February 2011 00:00
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What at one time looked like just a bad idea is all set to become a reality. New corporate affairs minister Murli Deora is readying to put into the Companies Bill, an idea first mooted by his predecessor Salman Khurshid, of mandating that companies compulsorily spend 2% of their net profits on what is now called Coercive Social Responsibility. It isn’t bad enough that India Inc, and ordinary citizens as well, pay a cess for education over and above the taxes they pay, there’s another cess being levied for building roads—that’s built into the retail prices of petrol and diesel. Add to this the fact that India Inc also needs to fulfil the government’s affirmative action agenda—the pressure on providing employment to SC/ST groups is slowly being ratcheted up—and you begin to wonder what we’re paying those taxes for. Sure, government expenditure is nowhere as efficient as private expenditure is, but then why not lower the tax burden in a commensurate manner? No country, other than Saudi Arabia, requires companies to pay a fixed amount of their income or profits to the government for the sole purpose of distributing to the underprivileged population!

 

Apart from the question of why we’re paying taxes, imagine the havoc the proposal will wreak on India Inc, and the backdoor entry it will provide for government inspectors. So let’s say Tata Steel says it has built a school with its CSR-fund and Tata Steel employees’ children go to that school. Is that to be considered corporate social responsibility? Shouldn’t the school also fulfil some social responsibilities in the same manner all private schools now have to reserve a fourth of their seats for SC/ST/OBC children (that’s another government responsibility the private sector is fulfilling)? And are we sure the school costs what Tata Steel says it does, and why should it pay so much to those teachers … Questions like these will almost certainly come up once Deora’s 2% CSR becomes a reality. And that’s when the inspectors will come back into the picture, just as they will in the case of private schools, thanks to the Right to Education Act. On the 20th anniversary of Manmohan Singh freeing up India Inc from inspector raj, a minister in his Cabinet is trying to bring it back. Singh had to have a chat with Deora to dissuade him from taking the line he did on Vedanta-Cairn while at the oil ministry. Perhaps it’s time to do the same again on his CSR proposal.

 

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