Wednesday, 29 May 2013

Ramamritham infiltrates Al Qaeda

I think we have found the way to destroy Al Qaeda, or for that matter, any terrorist organisation. Don't send the Navy Seals or the National Security Guard or Special Forces. Send in Ramamritham instead !

This post has no place in what is ostensibly a business blog, but this writer could not miss the opportunity to ridicule Ramamritham anywhere and everywhere. So , with apologies , here's the story.

When the French forces recently retook much of Mali from terrorists, the press who followed them found a detailed letter and a number of documents in a building which was a base or Al Qaeda. The letter was to a thug and hoodlum called Moktar Belmoktar. It throws light on how Ramamritham has wormed his way even into Al Qaeda.

The letter was a "warning letter" to the said terrorist castigating him for not filing expense statements !!! It also was expressing displeasure at his skipping meetings which he was to attend !! He was also castigated for pricing below Head Office instructions - apparently for release of a kidnap victim he agreed to a price of 700,000 Euros when the going rate was  3 million. He was also censured for making a "business trip" to Libya without having taken approval in advance.

Moktar was also revealed to have complained that he was not being promoted and that somebody less qualified was instead given the job. He sulked for a while , refused to take phone calls and complained in his PDP ! Still not being promoted, he then quit and started his own rival murderous gang.

If Al Qaeda monsters have to file expense statements and take prior permission for foreign travel, we have nothing more to fear from them. They are doomed.

I shall make a few more suggestions to Ramamritham to further help him in his noble quest

  • Impose a detailed dress code on terrorists. They have to wear a tie between Monday and Thursday. Friday, they have to wear  T shirts to show that they are cool
  • Instruct them that not displaying their ID card while carrying out a terrorist attack is an offence and if found so, they will be sent back home
  • Display the pick up and drop schedule every day. Moktar has to catch Innova No S-47D. He will be dropped only at end of his road and not in front of his home
  • He can browse his personal email only between 12.41 and 13.04 every day . Facebook, Twitter, etc are banned. All Jihadist sites of Al Qaeda are open, but rival sites are banned
  • Moktar has not filled last month's self appraisal form, demonstrating that he has adhered to the values of Al Qaeda (with examples). Therefore he may be asked to report to the HR manager for a dressing down.

All hail Ramamritham, for helping defang Al Qaeda.

Thursday, 23 May 2013

Tax evasion is a crime. Tax avoidance is a .... ?

In the good old days, this was an easy cliche. Tax evasion (breaking the law) was a crime. Tax avoidance (minimising paying the tax within the law) was something you were duty bound to do. Whether you are an individual, company, whatever. Period. Now it isn't so clear cut an answer.  And that says something about our times.

Witness the case of Apple. It does aggressive tax planning (all within the law). It has a big subsidiary in Ireland and has done a deal with the government there for a low tax rate. It does not bring overseas profits into the US, because it is double taxed then; so it leaves all its overseas profits overseas. All very legitimate. And yet there has been a huge outcry and a Congressional hearing where Apple is accused of not paying "its fair share of taxes".

Similar accusations are levied on Amazon, Google and Starbucks in the UK and indeed in many other countries. Nowhere are the authorities claiming they broke the law. They are just angry that these companies pay a low or zero tax despite large businesses in those countries.

From a public's point of view, there is no difference between evasion and avoidance. The expectation is that all companies must pay lots of taxes irrespective of the law and facts. Equally all rich people must pay big amounts of tax even if the law does not require them to do so. But for each individual himself, it is perfectly OK to evade tax (breaking the law). Queer set of values.

Almost everybody in India breaks the law when it comes to taxes. And before you protest too much, please answer if you have disclosed your savings bank interest as income in your tax return and if you have done no cash transactions above Rs 10,000. The less said about professions like lawyers, doctors and the like, the better. The salaried class is one of the worst offenders - their salaries are caught by the taxman under the withholding tax regime. Everything else, in the eyes of the salaried man or woman is not to be disclosed as after all they are paying "lots of tax" on their salaries.

Why does this work like that. Why is it OK for us to evade tax, but not for others even to avoid it. Is it just pure jealousy against the rich ? Is it just one law for everybody else and one law for us ? What is going on ?

For corporates and rich individuals, there is an expectation of  social responsibility at play here. It is not enough to follow the law. It is now required to be seen as "being fair to society" everywhere. This is a woolly concept ; after all what is the concept of fair.  But each company has to make its own "contract" with society. The more successful you are, the more demanding the contract.

Social responsibility has gotten an altogether new meaning, A far more challenging meaning. Companies have to be seen as "good citizens, whatever that means. Notice that the public's definition of a good citizen is "I break the law, but you shall do over and above the law". "

Its a tough world out there.

Friday, 17 May 2013

The economics of spot fixing

Yeah Yeah, I am that sort of a nerd. While much of India is agog with the spot fixing scandal that broke yesterday, this blogger ruminates on the economics of it. Yes, he is a weirdo !

Having got that out of the way, a few words on the scandal, for the 3 million non Indian readers this blog gets :)  There is a nonsensical game (anybody who suggests the word cricket in this connection will be personally bashed up by me) in which there is a cash machine called the Indian Premier League. Yesterday three players were caught, allegedly  hand in glove with bookies, manipulating results. That's all you really need to know.

What is baffling me is the economics of it. There are all sorts of reports, but I think it is safe to say that at least Rs 20 lakhs (some $40,000) was allegedly paid to the players to give away a minimum number of runs in an over. Let us say, for this to be profitable to the crooks who are betting on it, they must wager at least an equivalent amount at odds of say 5:1, otherwise its not worth it.  For this sort of betting to be accepted by the bookies and to remain valid, there must have been others betting at least 5 times this amount. So all in all some Rs 1.2 crores ($ Quarter a million) must have been bet.

All this simply on one over !!!!  An over, for the uninitiated, is of 6 balls and takes 3 minutes or so to complete. The way this scam seemed to have operated, there was about 2 or 3 minutes notice to the crooks that it was going to be fixed in that over.

What I want to know is who are these blokes who are prepared to gamble quarter a million dollars in 3 minutes on something as arcane as the number of runs given away in an over in an inconsequential match. And there are 40 such overs in one match and there are some 70 or so matches. The arithmetic is mind boggling.

Who are these jokers ? What do they look like and which planet do they come from ?

PS. Just for the record, the GDP per capita of India is $1,492.

Thursday, 16 May 2013

Everybody bashes the Taxman

If you have been following the news in the US, you might have noticed an almighty hullabaloo over the the IRS (their tax man) having targeted Tea Party and Conservative groups. Much hot air and righteous indignation is being spouted and Obama has fired the IRS chief yesterday. Almost everybody on earth loves to bash the taxman (rightfully so !) and this is all good fun.

Except that I believe that in this case the bashing is wrong. Or at least much exaggerated.

What happened is this. The IRS admits that it subjected groups which bore the name tea party, or patriot to extra scrutiny. The fact that such groups are exclusively Republican and that the President is a Democrat seems to indicate political targeting. That is, of course, against the law. Hence all this noise.

But why did the IRS do this - after all, they are not fools. If you try and answer this question, a different picture emerges.

The problem all started with, in my view,  the appalling judgement by the US Supreme Court in the Citizens United case in 2010. In layman terms the Supreme Court decided that organisations were people and had the same right of free speech as you and me. Therefore there could be no curbs on their political activities and donations.

Overnight, all sorts of action groups sprung up and the money started being being poured into US elections of all kinds.  Many of these outfits do not want to disclose who really gives them money. The way to achieve this is to register as a social welfare organisation under the tax code which then grants you tax exempt status - something called Sec 501(c)(4) exemption !! You are not prohibited then from indulging in political activity - its just that the primary activity has to be social welfare in nature. The main purpose of these groups is not to avoid tax (for they do not really seek to make a profit). The primary purpose is to avoid disclosing who is giving all the money.

It is probably a safe bet to say that the majority of these groups (Republican or Democrat) have zero interest in social welfare and are primarily there for  political activity.

From 2010 to 2012, the number of such organisations doubled to some 3400. A large number of them were "tea party" or "patriots". Do you really expect the IRS to sit tight and watch all this. After all, it is their job to check whether these outfits really were primarily involved in social welfare. 

The IRS did not prosecute them or withdraw their status. All they did , in true Ramamrtiham style, is to harass them with lengthy requests for information, do audit reviews, delay decisions on their applications and commence painstaking procedures. In this my sympathies are entirely with the said groups as we all know what the incredible capabilities of Ramamritham are.

The real culprit is the political donations sloshing around consequent to that awful Supreme Court verdict.  In true US politics style, this will not be addressed - instead the IRS will be hauled over coals. Yuk !

I never thought I would ever write a post in defence of Ramamritham, but there you go ... !

Tuesday, 7 May 2013

Thou shall be subsidised whether you want it or not

The law is an ass. Governments are a bigger ass. Ramamritham is the chief ass. But even by those standards this takes the cake.

Those familiar with India knows that this poor country indulges in wasteful expenditure of the worst sort. Free colour TVs, grinders, etc have made the news. But the criminal, inexcusable and worst sort of government waste is the subsidy on Liquefied Petroleum Gas (LPG). If there was a word stronger than criminal, I would use it.

LPG  is supplied to all and sundry at a subsidy. It is sold at roughly half the cost - the government is supposed to pay the balance half to the oil companies , but it does so as and when it feels like it, or not at all. It is actually quite difficult to estimate how much the total subsidy is as the government hides this in different pockets but my estimate is that this monstrosity costs us some Rs 30,000 crores.

The really poor don't use any cooking fuel at all - maybe firewood. The poor use kerosene. Only the relatively rich use LPG. Its actually the middle class which is pocketing all this money.

The middle class moans about the cost of cooking gas . And yet you only have to go 1 mile near T Nagar and the gold shops in Chennai to see the amount of money the middle class has. The total "subsidy" for a  year that you can now get is Rs 3600 or so per family. Are you telling me that the middle class household cannot afford to pay Rs 3600 more per year for cooking their food. This is the same middle class which is snapping up the newest model of smartphones every year.  Its a complete farce.

The impact overall of this organised stealing is simply awful. India has made no investments at all in piped gas supply. LPG cylinders are  still being trucked all over the country. There is zero interest in any alternate fuels.  A whole bureaucracy has evolved around oil companies, agencies, transporters etc. Try getting a new cooking gas connection now - its possibly easier to learn quantum mechanics.  If you wish to do a case study on how not to treat a consumer, all you have to do is stand near a gas agency for an hour and witness the tales of woe of the people coming there.

Actually, raising the price of cooking gas cylinder by Rs 1000 per cylinder might be a good idea - it will cause Rajalakshmi to reduce her girth ! Eating less food, especially by the middle class, is a desirable social goal :)

The problem is that there is really no other choice. Private gas companies do offer unsubsidised cooking gas without all the contortions, but they are small scale and unreliable. Even then, quite a few consumers have opted to go there, simply because of the impossibility of handling Ramamritham's requirements.

Being a contentious citizen (!!!), this blogger went to his agency and asked not to be given a subsidy. He was willing to pay the full price. He was promptly told that this was not possible and he has no option but to take the subsidised price.

What sort of a place is this where a consumer offers to pay more and the seller refuses. If ever proof was needed that governments, and Ramamrithams, are an ass ..........

Saturday, 4 May 2013

From those to whom much is given, much is expected

Capitalism, and more specifically markets, is the best mechanism humans have invented to pool resources from where they are available and get them to where they are needed the most.  This is true of capital. This is true of raw materials. This is also true of goods and services. This is , alas, not true of talent.

Talent is a blessing given by God to some of us. It would be vain to consider that talent is something we have earned. Yes, we may have nurtured it; yes we may have developed it; yes we may have worked extremely hard on it. But no; "we didn't build it" (with full apologies to the GOP). It was given to us.

And from those to whom much is given; much is expected too. You would expect that mankind would devise mechanisms whereby the world's best talent works on the most pressing problems facing it.  But here, mankind's mechanism to channel resources seems to fail. For sure, there is a talent market that pools talent and sends them to who is ready to pay the highest value for it.  But not necessarily to address the pressing problems humanity faces.

The best talent in the world does not work on eradicating, or at least minimising,  poverty. It does not work on preventing wars from happening and preventing the countless from being decimated by war. It does not work on the great inequities around the world. It does not work on preventing the so many preventable deaths of children dying of diseases which are eminently treatable today. It does not work in the most complex management task of all - managing countries.  It does not work in the challenge of leaving the world a better place for our children - without a crippling debt burden, without a deteriorating environment, without the hopelessness of a better world that seems to afflict the young today.

We all know, where the best talent in the world goes to. But why are markets so unable to channel talent to where it is needed the most ? For the benefit of all mankind. For future generations. For making the world a better place.

If markets fail to do this job, we have to invent another mechanism that will.  

This lament is inspired by the speech made at Harvard in 2007, by William H Gates III. He is not a great speaker, but his thoughts and ideas are truly great. The title of this post is a quote from a letter written by his mother to Melinda Gates when they were married.

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