Wednesday, February 27, 2008

Go tax destruction if you can !

Ok. Indian companies do more and more foreign buyouts and don’t bring dividends from those controlled foreign companies (CFC) back in. Taxman goes sniffing.

I object. Take TATA – Corus deal. The £ 4.3 billion ($ 9.16 bn) deal, has been funded by the TATAs almost entirely by leveraged debt and internal accruals that included diluting stakes in group companies like TCS and other TATA group companies. Now this watershed deal (world’s 65th ranked Indian steel company acquiring 5th largest steel company in the world) would not have been possible except for that adventurous yet high risk mode of financing opted by the TATAs. Should we not permit TATA to park its Corus dividend abroad that could be utilized in repaying TATA STEEL’s leveraged debt? Why bring it back only to tax it? If a company has taken some risk, it is entitled to its share of reward. Going after them like a bloodhound is not just irrational, it is way too regressive.

Paying taxes is a citizen’s duty and I acknowledge that so long as the taxmen don’t choke my oxygen supply pipe in the process. I quote Chanakya’s Arthasasthra - “There should be leniency and caution while deciding the tax structure. Ideally, governments should collect taxes like a honeybee, which sucks just the right amount of honey from the flower so that both can survive. Taxes should be collected in small and not in large proportions". Granted, I shouldn’t expect brazen taxmen to be endowed with regal finesse, but how about rationality?
I have often condemned the principle behind excise duty – a tax system leftover by our colonial masters that penalized local enterprise - as well. I say it's about time we chucked this agony off our back. My logic, why tax production? Should they not be taxing destruction with equal vigor? Or will that be too much to ask?

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