Daily News Mail - News of 16/05/2015

Back in black
New law is welcome, but more effective solutions to tax evasion lie in GST and reform of political funding.

• The government has finally managed to ensure the passage of important legislation, including the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015, fulfilling its promise to curb tax evasion and discourage money laundering. It also introduced the Benami Transaction (Prohibition) Bill in the Lok Sabha, aimed at checking domestic black money. The two bills provide for stiff jail terms for failure to disclose assets, punishment for every person responsible to a company for any offence and a monetary penalty of up to 25 per cent of the market value of the property. The tough new law may have unnerved some sections of industry, which fears that this could be a tool for harassment by taxmen. To allay concerns, Finance Minister Arun Jaitley said the government would offer a compliance window of a few months to come clean — sort of an amnesty.
• The new law, passed on the eve of the NDA’s one-year anniversary, may win the government political points, blunting criticism that it has not moved meaningfully on black money and corruption. But it cannot discount fears, voiced by certain lawmakers, among others, on potential misuse of the law. In a way, it reflects a mindset where a person is, prima facie, assumed to be guilty. Much of the unease has to do with the administration’s record on dealing with taxation and money laundering, and the experience of taxpayers, notably the recent tax demands on past investments of foreign funds. All this from a government that had Indian industry rooting for it after promising to put an end to “tax terrorism”. The government must recognise that, globally, efforts to counter evasion are centred on robust information gathering and exchange based on extensive use of technology, not through raids and fishing expeditions. Recent attempts at recovering illegal funds stashed abroad should also have convinced the government of the enormity of the challenge on the black money front.
• These laws may be a deterrent but a durable solution could lie in the form of the GST, which will subsume many other taxes and help change the way the real estate industry operates, by providing a set-off on transactions and stamp duty only on the value added part. That and a reform of political funding in India are what the government should expend its energies on.

Right to have a childhood

• The Union Cabinet’s approval of a set of amendments to the Child Labour (Prohibition and Regulation) Act, 1986 raises serious doubts and concerns. One of these proposes to ban the employment of children below 14 years in all occupations except family enterprises and the audio-visual entertainment industry, on condition that such work does not interfere with their education. One amendment proposes to regulate “adolescents” in the 14-18 age group by prohibiting their employment in hazardous occupations unsuitable to their age. There is no doubt that the 1986 Act itself needs to be amended. First, the law has proved to be weak and ineffective in curbing child labour. Second, it is in contradiction with Article 21-A of the Constitution and the Right of Children to Free and Compulsory Education Act, 2009 that makes schooling compulsory for all in the age group of six to 14 years. Third, the 1986 Act does not regulate adolescent labour as mandated by ILO Conventions 138 and 182.
• Although the government’s intention to amend the Act is to be appreciated, what is deeply problematic is its intention to exempt from the ban employment in family enterprises. It is suggested that poverty and socio-economic conditions in India justify children helping their families in certain occupations where the possibility of any harm coming upon them does not exist, provided that they balance the work with schooling. This may sound reasonable but may prove unworkable. The law potentially opens loopholes that will sustain or even encourage child labour, creating a regulatory nightmare. Here the government fails to recognise that family enterprises can also prove to be exploitative and oppressive for children. ‘Family enterprises’ fall in the unorganised sector, making them an amorphous legal category that is hard to govern. Such a law will adversely affect girl children who are often forced into domestic work, or Dalits and those from the minorities who work out of dire poverty but are ultimately denied the joys of childhood.
•  Moreover, instead of just tinkering with the 1986 Act, the government needs to comprehensively overhaul it, focussing on the rehabilitation of children rescued from traumatic working conditions. This requires an interlinking of ‘rescue, rehabilitation and schooling’ through greater coordination among Ministries and organisations, and the inter-locking of the provisions of existing laws such as the RTE Act, the Bonded Labour System (Abolition) Act, 1976; the Factories Act, 1948; the Beedi and Cigar Workers Act, 1996 and so on. It is meanwhile also disheartening that the budget allocation for the Ministry of Women and Child Development has been reduced from Rs.18,588 crore to Rs.10,382 crore.