Send Ramamritham to Mars

Statutory Warning : This piece is not a sober, reasoned, point of view. It is an unadulterated rant. It may be highly biased and devoid of much logical argument. But , what the hell, once in a  while a blogger deserves a good yell. So here goes

I wish the Indian Space Agency had hit upon the idea of sending somebody with a one way ticket in the recently launched Mars expedition. I would have happily sponsored the ticket for Ramamritham. Especially the Ramamritham who sits in the Income Tax Department.

What has prompted this rant is the antics by Ramamritham against Nokia. He has been going against Nokia disallowing their royalty payments as an expense and demanding tax on them. When the company refused, he went to court and has frozen their main factory in Sriperumbudur.  By this act, he is jeopardising the sale of Nokia's telecom business to Microsoft. Succumbing to sheer blackmail, Nokia has offered to pay some Rs 2000 crores just to get Ramamritham off its back - so that it can include the Indian operations in the sale to Microsoft. This is nothing short of extortion. But Ramamritham has refused this amount too to settle the case .

This specimen has a problem with every global company that operates in India. He has a problem with their linkage with overseas operations - maybe transfer pricing., maybe structuring of M&A, maybe whatever. He has gone after Vodafone in the famous case, he is going after IBM, he is going after Nokia and no doubt he will be going against every global company that operates in India.

I am not for one moment saying that global corporations are saints. Far from it. But these sort of tax planning actions are done by all companies in all corners of the world. Remember, tax avoidance is not a crime; only tax evasion is. Every company cannot be a rogue. In true Ramamritham fashion he is going after soft targets and cares two hoots about its fall out effects on the Indian economy. No  global M&A transaction is possible these days without India proving to be a massive headache or else excluded altogether. Every Indian operation now has to staff an oversize tax department to cater to Ramamritham. Only an absolute idiot will invest in India today. India is not some special divine country which is separate from the rest of the world. If Ramamritham has a problem with transfer pricing, he should go to the WTO and negotiate tax treaties with the entire world. He should also remember that the shoe can equally be on the other foot too - other governments can also screw Indian companies in their respective countries. The US equivalent of Ramamritham has to only do a fraction of what he is doing and the Indian IT industry will come to a halt.

The British government and the Finnish government, to name only two, have intervened at government levels and asked the Prime Minister to rein in Ramamritham. But Ramamritham cannot be stopped. Once he has gotten into his silly head that he must do something, not even an asteroid hit will stop him.

If Ramamritham is seriously interested in increasing tax revenues, he should at least be man enough to go after the people who do not pay any tax at all. Only 3% of the Indian population pays income tax. The rest of the 97% don't. If he has the guts, he should go after the blatant tax evaders, who number in the millions. By going against respected companies, who are tax payers,  he is basically saying to the world - come to India at your peril. We would be delighted if you don't come to India at all . In Ramamritham's view of the world, it is best if there is no economic activity at all - for then his tax department will be perfect - there are no taxes to collect and hence nobody to go after.

Deliver us God, from this parasite who infests us. The only route to salvation for India is to send Ramamritham to Mars.

Read More

Narendra Modi and Ramamritham

This blog steers clear of political issues (or at least tries to), and therefore it would not be appropriate to comment for or against the incoming government in India. However this blogger is a world leading authority on Ramamritham and therefore considers it fair to warn the incoming Prime Minister on the tactics and mechanism of dealing with this specimen.

The incoming Prime Minister of India is reputed to favour high quality bureaucrats, give them political cover and a free hand and then hold them accountable for delivery. That is classic good management,  but he has thus far only dealt with the admirable Gujjubhai Shah. The situation is far more nuanced when it comes to Ramamritham, especially the variety that is found in the Central government.

Firstly the Ramamritham in the Centre has, for the last five years, forgotten what it means to take a decision. Terrified by sundry agencies like the Auditor General, the CBI, the Press, etc, he has not taken a single decision in the last 3 years. To get him to change will be difficult.

Secondly, Ramamritham has found unimaginable joy in terrorism. In the past  he revelled only in saying No. Now he has discovered the joy of positively going after everybody. The incoming Prime Minister has himself referred to the tax terrorism he has unleashed. Once a terrorist has tasted blood, it is difficult to wean him away from this.

Thirdly the number of Ramamrithams has exploded. Because we have had gargantuan ministries, Ramamritham has been delightfully cloning himself. And he will defend his turf like a cornered animal.  I believe the incoming Prime Minister wants to rationalise and reduce the number of ministries. That will be tough to do.

Fourthly the Prime Minister has reportedly asked for presentations from every Ramamritham in town. This is downright dangerous. Each character will spin yarns so convoluted that even the most intelligent of men will be ensnared in them. He will convince any listener that Section, 5 subsection 7.3 (iv) of an obscure Act is the most important life and death situation facing the country. He is capable of fantastic gobbledygook.

Fifthly, he will try his best to house train you in as quick a time as possible. Look at what happened to the savvy, experienced Pranab Mukherjee. It was Ramamritham who had brainwashed him into unleashing tax terrorism.  Your first sign that he is trying to get you house trained will be in giving you 24 forms to sign because some formality of your becoming a Prime Minister has to be completed.

Therefore, my dear Prime Minister, you have only a very short window of time to act. First, summarily sack half the Ramamrithams. Abolish , in the stroke of a pen, wholesale departments - like Dept of Youth Affairs, Hindi Implementation, etc etc. Don't merge them - the only way to treat gangrene is to amputate.

Secondly terrorise Ramamritham. Tell him that if he terrorises anybody, you will emasculate him and transfer him as special ambassador to Bophuthatswana. The only fear Ramamritham has is to be removed from the corridors of power.

Thirdly do not ask Ramamritham about anything. Just tell him. Better still order him. And threaten him with  dire consequences as suggested above. Tell him that you will defend him against the CBI, the Press, the CAG, etc, but if one citizen complains against him, you will roast him alive.

Finally hold him accountable. He is the slipperiest eel on earth and has spent a lifetime avoiding any responsibility. Tell him if he screws up even the tiniest objective, you will withdraw his pension, force him to accept a Somalian as his son in law and get the US government to cancel his US visa so that he can't go see his grand children. The pettier his action, that more rigorous the retribution.

It has often been said that the recent election saw a triumph of hope, of aspirations, etc etc. I heartily agree. For me, it is not a hope that the GDP will grow, or everybody will become richer, or we will be more powerful on the world stage. All that will happen in spite of the government. The biggest hope for me is that you will castrate Ramamritham. If you do that, I am prepared to vote for you again and again, even if you have not succeeded in doing anything else.

PS: For newcomers to the blog, let me explain this character called Ramamritham. He is a fictional petty, narrow minded, obstructionist, pedantic, useless government official. He is purely fictional and any resemblance to anybody dead or alive is purely accidental.

PPS : This blogger has just finished the first draft of his tax return and you can perhaps understand the trigger for this rant.

Read More

Sack Ramamritham

Ramamritham must be sacked - plain and simple. He is usually just a nuisance and a pain in the posterior, but otherwise a good man. But recently he has crossed the barrier and is now a genuine danger. He must be read the riot act and told to go.

I am referring to his contortions and nonsensical behaviour in the Vodafone case. For those not familiar with this saga - here's a short summary.

Some years ago Vodafone bought a 67% stake in Hutchison Essar. Vodafone's Dutch company bought the shares from Hutchison Telecom which is a Hong Kong company. Neither the buyer, nor the seller was an  Indian company although the shares they bought were of a company whose operations are in India. Under ordinary tax laws in most countries in the world, including India, the place where the selling company is and the buying company is dictates where tax would be paid on the gains from the sale of shares (in this case neither was in India). This should have been a straightforward matter.

But Ramamritham decided to put his grubby fingers in. He levied a demand on Vodafone that capital gains tax was to be paid in India as the underlying asset was in India. Specious argument, but then Ramamritham is not exactly renowned for cold logic. The judicial process being what it is, Vodafone had to cough up a substantial amount (Rs 2500 crores of the total demand of Rs 12,000 crores ), before it could go on appeal.

The case duly went to the Supreme Court which told Ramamritham to *$%& off. That should have been it.

But Ramamritham decided that he would not return the money he had expropriated from Vodafone (you see he had spent it on giving free colour TVs to all and sundry). So he amends the law with retrospective effect in the latest budget to say that Vodafone has to pay. He has excelled himself - he has amended the law with retrospective effect dating back to 1962 !!!!! He can now open every sale or purchase of shares from 1962 and go after everybody. His justification - government will lose a lot of money if it has to refund Vodafone. The mind boggles - next he can simply rob you and me of all our money and then refuse to return it on the grounds that government will lose revenue.

It does not matter to him that the Supreme Court has ruled time and again that the law cannot be amended retrospectively. Ramamritham is trying to get away in this case by claiming that he is not amending the law but the notes to the law !

Have you noted that the blighter is going after Vodafone, which was the buyer and made no capital gain - it was Hutchison Telecom as the seller which made the gain. The simple reason is the Vodafone is in India and unfortunately in Ramamritham's grasp. Ramamritham can always find logic for his tantrums ( in this case the grounds are that Vodafone did not deduct tax at source). Hutchison Telecom does not exist in India; so he cannot go after them. They exist in China which of course has told Ramamritham where he can go and stuff it.

No sensible businessman can do business in India if Ramamritham continues to get away scot free. He must be sacked,  banished to Dhanushkodi and told never to return.

PS - For newbies to my blog, here's an introduction to this frustrating character called Ramamritham.

Read More

Beware bloggers; Ramamritham is after you

Readers of this blog are familiar with the mythical Ramamritham - the ubiquitous bureaucrat who frames awful rules and procedures. You can refresh your familiarity with this character here . Frequently this pest merely frames irritating rules that makes lives miserable, but rarely does he do direct harm. But this time he has outdone himself with his mischief and and is now proving to be a real menace. I am referring to the amendments he has proposed to the Indian IT Act, blandly named as the Draft Rule under Section 79 (nobody accused Ramamritham of possessing imagination)

Strip away the legalese and the implications are this

• the government can shut down any website, including blogs, for the vaguest of reasons
• Bloggers are responsible to censor reader comments ; if somebody comments inappropriately, its the blogger's problem
• Intermediaries have to do due diligence on all user material. So presumably the ISP should shut you off if you show your finger to Ramamritham
• Only an idiot will open a cyber cafe - the risks are simply not worth it.

Government censorship of the Internet is a worldwide problem. Regimes are struggling with how to tame the beast which they seldom understand. The ubiquity and speed of the net is something that is deeply unsettling. Hence this problem of censorship, which is creeping all over the world.

India's justification with censorship of the net started with terrorism. Because terrorists use the internet, it has to be policed, went the logic. It then extended to pornography. Clothed under such "laudable" aims, Ramamritham, in his trademark style has completely gone overboard. Consider the rules he is framing for cybercafes for example.

• A cyber cafe has to obtain a special license (neta babu raj is back)
• He must keep a hard and soft copy of log of all users in a prescribed format and must submit monthly returns to the licensing agency of all the websites that each user went to !!!
• Partitions in the cafe cannot exceed 4.5 feet in height (presumably so that Ramamritham can peer and see if the user is looking at dirty pictures)
• All screens of computers shall face outwards; so that they can be easily seen by others
• Police inspectors are authorised to come and inspect whether these rules are being followed (we all know what that means in India)
  

I haven't made all these up - these are in the Draft Rules. If you don't believe me you can read the bland document here. No wonder you rarely see any reasonable standard internet cafe in India.

The real danger to bloggers is this - if you offend the powers that be, they now have the legal right to hound you. Its no good to say that these powers are meant to be used only to block terrorism or incitement to hatred. The fact that these powers exist means that they will be misused. The history of Ramamritham indicates that he cannot resist using a power he has.

The right way in a democracy to stop this is to lobby your elected representative so that the bill is defeated in the parliament. Fat chance. Imagine a reasoned debate between Mulayam Singh Yadav and Azhagiri on the need to protect individual liberty. So we can only, but moan, in forums such as these.

I though I had returned back from China. Evidently, I haven't. Perhaps the only really "safe" place to go is to that blessed land where the First Amendment is guarded with unbelievable diligence and vigour. Meanwhile, dear readers, do me a favour. Please preface every comment of yours with " The Government of India is next only to God; Hail Ramamritham ; More power to him ". You'll help keep me out of jail. Thank you !

PS - For a more reasoned and less frivolous reporting of the issue go here and here
PPS - Disclaimer - Ramamritham is entirely mythical and any resemblance to any person living or dead is purely accidental !

Read More

United States beware - you have twisted Ramamritham's tail

The recent diplomatic spat between India and the US, should normally not be the subject matter of this blog - it having nothing to do with economics or business. However, since the nuclear weapon of Ramamritham has been invoked by India, it now falls into the realm of comment here, considering rhe world beating expertise this blog has on that venerable gentleman.

In case you have not been following the events, the US arrested the deputy consul of India in New York on the grounds that she had underpaid her domestic maid (imported from India) and consequently committed "visa fraud". I don't wish to discuss the merits of the case here, although this pertained to an event in the past, is subjudice in an Indian court, and very likely debatable hinging on the obscure valuation of accommodation and food. But in true American government fashion, this was handled with extreme insensitivity - the lady was arrested as she was dropping her children to school , handcuffed in public, searched (allegedly strip searched) and taken to jail before being released on bail.  This blogger has long been a critic of how America handles such matters even when it comes to its own citizens - there is hardly a need to handcuff people , make them do the perp walk, hold them along with those accused of criminal charges etc, for alleged civil crimes. No civilised country does this  but that is the prerogative of American voters to decide if it is right or wrong.

India, or at least, the Indian government is mightily pissed and has retaliated. It has done such things as summoning the US ambassador in India and giving her a dressing down, refusing to meet a US delegation currently in India and such other diplomatic rebuffs.  But the real deadly move has been to let Ramamritham loose on the US embassy in India ! Ramamritham has now sought details of the activities of every diplomat and his or her spouse, asked them to furnish details of salaries paid to Indian staff, including maids, they employ here, etc etc. He has asked them to turn in their ID cards and has withdrawn their special privileges that breezes them through the every day bureaucracy that anybody in India faces. He has also hinted that gays in the US embassy could equally be arrested under the current laws of India !!

America does not know what it is risking by attracting the attention of Ramamritham. If he puts his mind into it, he will discover innumerable violations of the law that American diplomats have done, albeit in ignorance or involuntarily.  Such is the nature of India's laws and pedantry that it is impossible for any human to exist in India without having violated the letter of  one law or the other. The violation may be purely procedural in nature - for example not filing some form or intimating some trifling detail, but that is enough. Ramamritham will go after you with gusto. There is no power on earth who can stop him. For example if the diplomat and his family have stayed in a hotel somewhere and not taken great care to fill their nationality as US citizen on the hotel form (whoever looks at that form's fine print when checking in at 11 PM after a delayed flight) - he has committed a crime. Years ago, Ramamritham arrested Nusli Wadia precisely for this ! If the embassy has not displayed the Provident Fund rules on its notice board for the benefit of Indian staff (and there are rules on where the notice board has to be situated in relation to the office) , it has broken the law.  There are potentially 1,453, 678 violations he can look into. I have great pity for the American embassy staff and their families - they have no idea what they have gotten into - and all because of the actions of some insensitive pig headed Ramamritham equivalent in New York.

If the United States knows what is good for it, it will promptly meet with Ramamritham, beg his pardon, fall at his feet ,  do shashtang namaskar, recite Abhivadiye three times and beseech him to turn his kind attention back on the hapless Indian citizens who he has been torturing from time immemorial.

Read More

Ramamritham falls in love

Who is the person I hate the most ? No; not that one, whom I frankly don't care about . He is half the planet away and troubling other folks; not me. My visceral hate is reserved for somebody much closer home. The "dotard" called Ramamritham. Allow me an unhinged rant please; I badly need it !

You see, the problem is that Ramamritham has fallen head over heels in insane love. We all know how crazy he is even when supposedly normal. Now that his brain circuits have been singed with love, he has become a monster. The delectable damsel who has swept this idiot off his rockers is called Aadhaar.

For the benefit of the one American reader who claims to be ignorant about India (no; not the lady - she is an expert !), Aadhaar is the national ID that every resident of India is supposed to get.

The government introduced Aadhaar some 5 years ago ostensibly as a way to identify individuals to whom subsidies could be paid directly and thereby minimise leakages.  The government gave pious assurances (including to the Supreme Court) that Aadhaar was not compulsory or mandatory and it would never make it so.

I think the government framed this with good intentions, but had not factored that the old toothless fart, Ramamritham, would fall in love with this.  They say love makes you irrational, and if anybody needed any further proof of this, look at what this apology to the human race is doing.

He first made Aadhaar mandatory for buying gas cylinders. Then he made it mandatory to operate any bank account. Then he made it mandatory to file a  tax return.  But where he has gone completely bonkers is that he has now made it mandatory for a mobile connection !! And where it truly descends into madness is that its not just an Aadhaar number that this clown wants. He wants a fingerprint match for every mobile owner !! No; I am not joking. He wants to fingerprint you before you have a mobile phone.

Consider the logistics. There are 1.2 billion people in India. Perhaps some 800 million own a mobile phone. And we being the argumentative Indians we are,  don't possess just one connection . Almost everybody has two SIM cards. And this is what Ramamritham wants us to do.

1. Go physically to a store of the mobile company (they usually have one store for a million users)

2. Stand in a queue ; you can imagine the length of the queue yourself

3. Give your mobile number and Aadhaar number to whoever is behind the counter

4. You will get a one time password on your phone

5. Give this number to the flunkey

6. He will enter some 10 fields into a computer system that has been ordained by Ramamritham.

7. You then place your thumb on a fingerprint reader

8. If it goes through (and that's a big IF - see below), then the flunkey does some more fiddling with the system

9. You then place your thumb a second time (Ramamritham wants to make absolutely sure)

10. If it again goes through, then say four different prayers and then go home

11. You'll get a SMS saying that your request has been registered and that you will get a confirmation in 24/48 hours

12. If you get a SMS after 24/48 hours, you should follow the instructions there and type Y or N or don't do anything

13. If you fail in any of these steps, go to Step 1

Note : The big IF arises because , this being India, any sensible store has bought a cheap Chinese fingerprint reader and it is impregnated with the smudges of the half a million people who have tried to bestow their affections on it.  Therefore your fingerprint is rarely read on the first attempt. If you fail in three attempts, your Aadhaar gets locked and if you want to unlock it then you have to undergo some contortions not dissimilar to what a certain Mr Scaramucci suggested a Mr Bannon was in the habit of doing.

800 million Indians have to do this twice ( not just once, for you see everyone has two SIM cards). If you are stretcher bound, you still have to do this. Nobody else can do it for you because you have to press your damn thumb on that damn machine in the store. If you don't do this by February, be prepared to just not have a mobile phone. Cost estimates for the whole nation to cater to Ramamritham's love affair have been pegged at Rs 1000 crores.

I have lived in the most obsessed country in the world which wants to control every single bit of information you have access to - China. This is the country that has blocked Twitter, Facebook, YouTube, WhatsApp, ............ This is the country that employs a million people to read every tweet and delete those that it doesn't like. Even in that country, buying a SIM card was as simple as going to a corner shop and just buying it. No paper, no forms, no crap. It takes all of 2 minutes. And I am now supposed to be living in a liberal democracy called India. And I have to do all of what I have outlined in this post, simply to have the privilege of talking to a friend.

Unfortunately this is not the worst of it. The other day, I had to receive a payment from some company. They demanded my Aadhaar. Very soon, if I have to pee, I am sure I will have to validate my Aadhaar.

Readers are invited to design the most creative torture that can be inflicted on Ramamritham. And to the good American referred to earlier in the post. Let's do an exchange. I'll gladly take your dear leader in exchange for Ramamritham !!

Read More

The pox on Ramamritham (for the nth time)

Regular readers of this blog know that this blogger rather likes railing against Ramamritham. Ever so often, there has to be a post yelling at this cursed individual.

This time it is on the Department of telecom (DoT) which is a pesky nuisance that purports to regulate every aspect of  our phones and how we talk to others. Along with the child it spawned TRAI - The Telecom Regulatory Authority of India, they have been busy over the last decade framing rules and procedures for everything on earth. Did you know that every phone company has to publish its prices and tariffs in a prescribed format  ? If you have seen that format, you'll know that you need a PhD in mathematics to understand it.

One result is that you have to go armed with lots of paper and proof for something as simple as getting a SIM Card. In control obsessed China, I just went to a corner shop and bought a SIM. It took me 2 minutes to do so. In India, you submit an ID proof and an address proof (of course Raramritham has written rules on which documents will be accepted for either of those proofs), then wait a while as the SIM is "activated", then you call up a number and revalidate the proofs you have submitted ........

The latest antics of Ramamritham that has got my goat is that he has ruled that all phones henceforth sold in India must have GPS. His logic ? The safety and security of women is "of utmost importance"  says this blessed specimen. If she is in danger, we can trace her whereabouts through the GPS signal !!

Really ?? Is it the business of Ramamritham to be legislating such nonsense ?  If he was really concerned about women's safety, he would be improving police coverage,  improving response time to complaints, ensuring more policewomen in the force, ensuring that cases are brought to speedy trial,  having a helpline where somebody actually answers the phone, etc etc. No. That's all too difficult to do. Instead he can indulge in his favourite activity - write a rule.

Never mind that if a woman wanted GPS on her phone to reassure her of security, she can simply go and get such a phone. No. It has to be legislated.

India has an installed base of 400 million phones that are euphemistically called "feature phones". Translation - they do not have feature such as GPS ! The cost of a phone is likely to increase by Rs 400 if GPS has to be featured in all phones.  That of course, does not bother Ramamritham.

When the industry protested, in true style Ramamritham replies - " It is reiterated that all mobile handset makers should adhere , blah blah, to implementation of GPS facility in all mobile phones sold in India from January 1 , 2018. The representation (sic) in this regard will not be entertained in future " . Beautiful.

Can all scientists stop their work on space exploration, finding a cure for cancer, sequencing the DNA, etc etc and instead concentrate single mindedly on the eradication of Ramamritham please !

PS : Ramamritham is a fictional name invented by the blogger to typify the useless, pedantic, petty and painful bureaucrat !

Read More

Ramamritham rules

Alas, Ramamritham is alive , well and strong and he rules upon all that he surveys (pun intended).  The Indian Government will announce today in parliament that it would open up the retail sector to foreign investment. No doubt the Left will organise some bandhs, yell at 10,000 decibels in the Lok Sabha, and then this law will be passed while the opposition will walk out en masse.

Ostensibly, this is economic reform. Its a pathetic, 15cms of reform after a decade of nothing happening, but we'll reserve that criticism for another day. What has got my goat is Ramamritham's dirty footprint all across this move.

Firstly foreign investment of 100% will be allowed in Single Brand Retail, but only 51% in multi brand retail. Therefore a Marks & Spencer store can be 100% foreign owned, but Carrefour can't. Even though they may both sell precisely the same things (M&S does sell a lot of food). Pray why ??

Secondly Ramamritham has excelled himself in drafting a series of conditions for allowing  even this. Look at some of them

• The minimum investment is $100 m. Where he got this figure is unclear. Why not $82.5 m? But at least we can live with this
• 50% of this $100 m has to be invested in "back end". Then our venerable hero has gone on to clarify that land, rentals and front end stores will not count as back end. No doubt detailed rules on what is back and what is front will be framed. (here is conclusive proof at last that Ramamritham doesn't know his front side from his back side) Lobbyists will work very hard to get IT systems included in back end. But R will qualify that Microsoft Office will not count as back end. Many months of fruitful work and litigation awaits.
• 30% has to be sourced by these companies from small scale (completely irrelevant if the product is rubbish and the consumer does not want it) No doubt a front small scale company will be set up who will buy the stuff from a big company and then sell it to the retailer to fulfill this quota. R being very smart will then draft rules to stop this. The retailer being equally smart will get a small scale company to buy from a small scale company to buy from a big company ....... and so on.
• Stores can be set up only in cities with 1 million population. Lobbyists will work to reduce this number to half a million. They will then lobby that last year Gummidipoondi crossed 1 million population and that R should not wait for another 10 years for the next census but instead pass an interim order allowing the store to be opened there.

How can we get this into Ramamritham's thick skull that we don't want him deciding what is good or bad for us as consumers.  Or for the small Indian retailer who he is trying to protect with such quixotic rules. The Indian retailer needs no protection. He is quite a formidable force. Its by no means certain that small retailers will vanish just because Walmart came in - in India the economics of the retail industry, especially the relative high cost of real estate,  is such that this is very unlikely.

In any case, how about letting the consumer choose. Rajalakshmi will vote with her feet and purse. She will buy where something is cheaper, better and where she likes to go. She deserves that freedom. Ramamritham should be booted from blocking the way.

PS : For those new to this space, Ramaritham is the mythical, fictional bureaucrat who takes orgasmic pleasure in framing complex, unnecessary and useless rules in order to make lives miserable for ordinary members of the homo sapiens species.

Read More

Coffee is bad

What does Ramamritham have against coffee ? I would have thought the caricature of Ramaritham included a cup of coffee and The Hindu. Yet here's this venerable gentleman having an angst against coffee . Why ?

I am referring to IKEA's application to open retail stores across India. You may recall that the move to allow foreign owned retailers to set up shop in India is a recent one (Didi notwithstanding).  IKEA has been one of the first to submit their proposal, willing to bring it no less than Rs 10,000 crores of investment. You would have thought that they would be welcomed with open arms  - it is difficult to see boxed furniture being a threat to national sovereignty. But what they got was not a red carpet - instead they were treated with the full attention of Ramamritham. (in the guise of the Foreign Investment Promotion Board - FIPB)

I am no fan of IKEA stores. If you've been to one, they are all predictably the same format. You are forced to walk along one km of winding corridors that entirely destroy your sense of direction. You have to gaze at their full force of merchandise even if you want to buy a safety pin. After all those wanderings you are dying to sit down and rest your aching legs. Dutifully at the end of the trail you can buy a cup of coffee. Their format world over is the same.

Its the cup of coffee that has aroused Ramamritham's ire. Believe it or not, Ramamritham has turned down IKEA's application saying that they could not have a coffee shop - it appears that would become multi brand retail as the coffee is not IKEA branded coffee and hence would fall foul of the rules. Never mind the Rs 10,000 crores investment. FIPB is disallowing the proposal objecting to the coffee shop.

Finally the Commerce Minister had to intervene and suggest to Ramamritham that this is utterly nonsensical. He has asked IKEA to submit their proposal again and has promised them that he is partial to coffee.

Long long ago, when P Chidambaram was still a starry eyed reformer , he summoned a character called the Controller of Imports and Exports ( a terror those days) and asked him what he did. The worthy launched an impassioned plea as to how important and onerous his role was. PC's riposte was that he could perhaps understand that he had a role to play regarding imports, but pray, what was he doing trying to control exports ?? Within a few months he simply abolished the post.

I suggest he does a similar hatchet job on the FIPB. They perform no useful role. Open up investment in every sector barring maybe defence (even there there are arguments to  opening up for investment). Remember opening up for foreign investment does not mean that they can violate the law of the land. That provides the country ample protection against misbehaviour.

The only way to deal with nonsensical behaviour of objecting to the coffee shop is to abolish Ramamritham entirely.  Can Anand Sharma, the Commerce Minister, take a leaf out of his old predecessor and abolish the FIPB ?

PS :Newcomers to this blog who may not have been introduced to Ramamritham may get acquainted here.

Read More

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.

Read More

Ramamritham goes to the US

Guess which country is this ? The decision on where a company should locate a new factory is made by the unions and the government. The company, which thought it could decide for itself,  is rapped on the knuckles for presuming this right. Where could this be in this day and age - North Korea ? Zimbabwe ? Libya ? Alas, none of these. It is actually the US of A.

The company in question is Boeing. For long it has had factories in the Pacific NorthWest - in the states of Washington and Oregon. It now needs additional manufacturing capacity for making the Dreamliner - the new 787  series that is being launched worldwide.  It set up an additional factory in South Carolina. The unions representing the Washington and Oregon plant workers filed a complaint with the National Labour Relations Board (NLRB). The NLRB upheld the complaint - Boeing was wrong to open a factory in South Carolina !!

The case boggles the mind. Boeing did not shut down any factory or lay off any workers. On the contrary it actually increased its workers at the Northwest factories to run it to full capacity. But instead of building a new factory there, it built it in South Carolina. It could have very well built it in the Northwest. But its problem was that every three years or so the workers there were going on strike and this was severely impacting the company.  The unions complained, and the NLRB upheld this complaint, that "Boeing's actions were motivated by a desire to retailiate for past strikes and chill future strike activity" !

Underneath it all is the big fight between organised labour and business in America. The case of the autoworkers in Detroit is well known. The undercurrent is also the competition between "union shop" states and the "right to work" states. In some states in the US, company workers are forced to join the established unions and pay membership fees by law. Washington and Oregon fall in this category. In other states, workers cannot be forced by unions to become members. South Carolina falls in this group. No prizes for why Boeing, or for that matter, any company, wants to site factories in states like South Carolina.

This being America, Boeing is going to the courts. Lawyers on both sides are rubbing their hands in glee.

A larger trend in America (and more so in Europe) is the rapid expansion of the license raj. Governments and petty bureaucrats are increasingly coming in the way of business, in a manner reminiscent of Ramamritham of India. The Economist in two recent articles has actually used the term "license raj" - you can read them here and here and they make wonderful reading if you are interested in the antics of Ramamritham's ilk.

Ramamritham's counterpart in the UK is called Sir Humphrey Appleby. I now have to invent a name for his American cousin !!

Read More

Alibaba and the Fourteen Years

Which is the biggest ecommerce company in the world ? Take a guess. Amazon ? E Bay ? You would be wrong if you guessed either of them. The biggest e commerce company in the world is Alibaba. Its portals handled a sales volume of some $ 170 bn. That is more than the volumes handled by Amazon and E Bay combined.

No, this is not some elaborate hoax dreamed up from 1001 Nights. Alibaba is indeed the largest e commerce company in the world. The reason you may have never heard about it is that it operates almost exclusively in China. It started life as simply Alibaba.com , a business to business portal. It then added Taobao - a consumer to consumer portal, whose similarity to E Bay is, of course, entirely coincidental. Now it has started Tmall, a business to consumer portal, which again, bears a completely coincidental similarity to Amazon. All this in just fourteen years. The last two, if you click on the link, you will see are entirely in Chinese. And therein lies the issue. Can Alibaba really be a global major, while being largely only in China.

One of the trends you may have not noticed is that China has overtaken the US as the largest ecommerce market in the world. Chinese love to shop. And they are merrily shopping online. There is terrific internet penetration in China. And Alibaba, thanks to its visionary founder, Jack Ma, is reaping the rewards.

But then, can it be really the dominant player in the world ? I can't see shoppers of virtually any other country migrating to Taobao or TMall, even if it is in English.  "Open Sesame" worked for the fictional Alibaba, but its hard to see the doors opening that easily for the real Alibaba. There is a huge brand image problem to be overcome, not just of Alibaba, but even of China. As Huawei and a clutch of Chinese companies have discovered, it is not easy going global.

Even in the home market, Alibaba's position will surely be under threat from competition. However big the Chinese market may grow into, its hard to see any company being the world's dominant major, being exclusively in China. As Britain discovered a century ago and the US is discovering now, the sun does set on everybody who thinks he alone can dominate the world.

What of the supposedly more tech savvy India. India does not even have a pipsqueak of an ecommerce company. Why ? The blame for that is squarely on Ramamritham. He has made internet connectivity one of the most difficult things in India to obtain. He has virtually made impossible an Internet Cafe industry. He does not allow easy payment systems to emerge. He goes after those who try, like Flipkart,  and brings his full attention on them by lodging all sorts of cases. And he does not allow the global majors to come in.

And therein also lies the risk for Alibaba. Thus far, the Chinese equivalent of Ramamritham , Li Xiao has left them alone. But then Li Xiao is not a bureaucrat. Li Xiao is from the Party. Ramamritham is completely predictable - he will create every obstacle possible, but do nothing else. Li Xiao is entirely unpredictable. If Alibaba attracts political attention, then its fate is sealed.That's probably why the wily Jack Ma is stepping down as CEO. And he is planning an IPO. An IPO that might even best the Facebook IPO.

Read More

Make in India

India is an outlier in terms of economic development. Traditional economic theory suggests that in the beginning all economies are dominated by agriculture. As the economy develops, manufacturing becomes the predominant sector. Further up in the stage of development comes services. The linear development is the model for all countries, including China. The one exception is India.

India has never been a manufacturing economy and has leapfrogged to becoming a service economy. A full 55% of India's economy is the service sector. This is all fine, but for one problem. Where are the jobs for the teeming millions of Indians going to come from ? You need a big manufacturing base to absorb the youth coming into the job market every year. India has to create 12 m new jobs every year. Hence the Make in India need.

India actually has a huge competitive advantage now - it is actually cheaper as a manufacturing destination than China. China has become expensive, but retains its predominant position simply because there is no real alternative at that scale. Countries like Vietnam or Bangladesh are small. The only big competitor is India. 

Achieving real manufacturing scale and , thereby jobs, will need concerted action over 20 years. Mere slogans will, of course, achieve nothing. This has to be backed up by proper policy action.

What is needed to be done ?  Quite a lot actually, but let us begin with three things that do not need to be done

- Tax incentives to manufacturing. This is the soft option, but must not be done. Neither is it necessary nor is it equitable to do so.

- Lowering interest rates. All the pressure on the RBI governor is self serving bullshit. No serious company makes investment decisions based on short term interest rate

- Diluting labour laws. Actually this is hardly needed. Labour laws, other than when factories are closed, are actually sensible, fair and progressive in India today. It is better than, say, in France. We should not dilute labour laws and allow the Rambo manufacturing that  happened in China.

The key elements that need to be tackled are

- Amending the Land Acquisition Act. The last Act completely swung the other way and as it stands now it is almost impossible to acquire land to set up a factory. The government, realising this, is acting through an ordinance

- Infrastructure - Ports, Roads, Railways and Power. This will take time, but must be done largely by the government, although partnership with the private sector will also be key.

- Single window clearance from the government. All clearances within 3 months for setting up a factory.  Doesn't matter if a mistake or two is made.

- Remove all caps on foreign investment in manufacturing. Who cares where the money is coming from as long as jobs are created. 

- Rein in Ramamritham. If possible chop him into bits and throw him into the sea. You just have to drive through Sriperumbudur, on the outskirts of Madras to see the havoc Income Tax Ramamritham has caused. Shut factories - Nokia, Foxconn ...... Any industrialist who now starts a factory without a cast iron defence against Ramamritham is an idiot.

- Enforce contacts and the rule of law speedily. Perhaps even a separate judicial process for business matters. One of the sad facts in India is that despite the rule of law, contracts, especially with the government, are practically unenforceable.

- Make India, one India. Each state competes with others to create bottlenecks and roadblocks, because of the preponderance of local Ramamrithams. National laws, such as the GST are an imperative. The Centre cannot dictate this, but should simply go ahead with the willing states and leave the outliers either to join the bandwagon or suffer.

- Stay the course. Create the framework and then don't change it for a decade at least. Let a thousand flowers bloom !

None of this is even politically contentious in a major way. Start and build  momentum. Investments will come. Money will be found. A juggernaut, once started, cannot be stopped - there is already the example of the IT industry.

Motor ahead, India.

Read More

Cry for me, Argentina

Its time to change Andrew Lloyd Webber's famous song in Evita. There's no option, but to cry for Argentina. How else can you react to the awful move by Cristina Fernandez, Argentina's President, to nationalise YPF, two weeks ago ?

YPF, Argentina's largest oil and gas company is 57% owned by Repsol, the Spanish oil giant. Ms Fernandez's grouse against Repsol is that it is not investing in increasing production in YPF. This is partly true, but the real reason why YPF is not expanding production is that her government has artificially kept petroleum product prices low . No company is going to invest for very little profit. So the good lady has decided to nationalise the company. No doubt, a pittance would be paid to Repsol, well below the market value of its shares in YPF. This is daylight robbery, of the kind Ramamritham (of Vodafone fame) would feel proud.

Is this any way to treat your largest foreign investor ? Spain and the EU are up in arms and threatening a fight. Spanish companies have significant investments in Argentina, united by a common language, of course. Argentina can kiss good bye to any foreign investor from now on. Already it is an international economic pariah having defaulted on its sovereign debt in 2001. However much you hate international finance, you need investors for any economic activity.

Does any serious country nationalise anything these days ? Is there any more proof needed that nationalisation and state control of industry does not work ?

An interesting by line is the parallel with Indian politics. Cristina Fernandez is a Rabri Devi. Her husband Nestor Kirchner was the strongman of Argentina. When the constitution limited him for a consecutive presidential term in 2007, he installed his wife as President and , well ...... The plan was that he would return back in 2011 as President. Unfortunately, God willed otherwise and he died. So, the lady continues.

The worrying thing is that what this lady is doing might be read, and emulated, by another lady who's running another Eastern state in India. Thankfully, the latter lady apparently does not read any newspapers other than those that only write about her greatness. She certainly doesn't read this blog and there is little risk that the Argentinian precedent will be known to her. But still ,.........

The real worry is that Ramamritham has learnt about this move in the opposite corner of the world. You see, the problem with Ramamritham is that he reads widely, maybe even this blog !! The real worry is that he will take a leaf out of Ms Fernandez's book.

Andrew Lloyd Webber will have to produce another musical then. "Sonia" the musical, will feature the hit song, Cry for me, India !

Read More

Pranabda ko gussa kyon aata hai

Statutory Warning - This post has language which may be offensive to some. Reader discretion is advised !

Why is the  Finance Minister  an angry old man  - approximate translation of the title of this post for non Indians. He is one of the most mature and level headed politicians in India. And yet, these days, he is behaving like an "old f&*% with that perpetual scowl on his face" - you can see zillions of this category in any apartment owners' association in India. Either he has gone a bit batty or has let Ramamritham loose - both of which are awful developments for India

I am referring to their collective antics relating to the tax laws in India. The Vodafone story is now well known and is the subject of an earlier post of mine. Pranabda is simply being extremely churlish and petty in pursuing this. I continue to be amazed that they are going after Vodafone (which was the buyer in this transaction and made no capital gain) rather than the seller, Hutchison Telecom, which is really the company they should go after. If Ramamritham has any b*&@$, he should take on China.

But they haven't stopped there. They are loudly defending the retrospective changes they have brought into the Income Tax law . In this process, they are also overriding bilateral tax treaties with many countries. Nonsense regarding sovereignty and the right of Parliament to enact any law it pleases is being spewed. They are seeking to impose GAAR (General Anti Avoidance Rules). In layman's language, GAAR  simply means that you as a tax payer have to prove your innocence (the taxman is simply going to assume that you are guilty). Fantastic. Grrrr.

I can understand the pressing need to raise revenue - given that they are spending money like water on doles and giveaways and simply borrowing their way to nirvana. Even grant for a minute that curtailing expenditure is a non option (wow).  But is this the way to raise money ?

Only 35m Indians pay Income Tax. That's 3% of the population. Is really 97% of India poor ? How about getting some more people to pay instead of screwing those who do ?? Just look at the fantastic (and mostly ill gotten) wealth in property most of which is in suitcases. How about tightening the noose on those. Even today you can earn Rs 10000000000 crores as "agricultural income" and not pay any income tax at all. Why not tax that ?

The relationship between the taxman and taxpayer is one of extreme confrontation in India - anybody who has been at the receiving end of attention from Ramamritham knows this. Laws are draconian and the concept of guilty until proven innocent is well engrained. Dispute resolution in a sensible way is non existent - everything is confrontation. With the latest scowl on Pranabda's face, its only going to get worse.

When will we ever learn that making laws simple and fair , keeping tax rates reasonable and letting economic activity boom is the surest way for governments to increase revenues. Pranabda knows all this - he is a wise and extremely experienced minister. And yet, look at what he has become.

Will the Pranabda of old resurface please ?

For a more level headed and saner piece on this issue, read here.

Read More

Amazon vs Walmart in India

The war for the future of the retail trade in the world is going to be fought in India. It has happened by default, but happen it nevertheless has. The irony hasn't struck the policymakers in India as yet - they of the medieval dinosaur disposition of still not allowing foreign companies into the retail sector in India. If that makes your head reel, then this is India, true to its form.

Globally, Walmart (the old incumbent) and Amazon ( the not so new disruptor) have been itching for a gigantic fight for a long time. In the US, Walmart dominates in store and Amazon dominates online. There it is a fight between one form of retail trade and another. Not a headlong fight. In China, which would have been the logical war zone, both have failed against domestic competition - not least because the playing field is not level (actually tilted a full 90 deg). Hence India, by default, has become the battlefield.

It actually is peculiar that India is the chosen fighting arena. This is a country where foreign firms are still not allowed to open a store in India. You need domestic partners. Every rabble rousing politician has demonstrated and agitated in the past against allowing wicked foreigners into the retail trade. Most of India's retail trade continues to be the mom and pop store. 

Amazon was the first to enter. Amazon.in is now globally second (distantly) only to Amazon.com in the Amazon universe. E Commerce is still minuscule in India but given India's size , even minuscule is big. Amazon has been pouring money into India, adopting the time tested formula from the US. Their competition was Flipkart, a local E Commerce provider. Now Walmart is acquiring Flipkart. This will now become an all out battle between the two for the online market . Right now Flipkart and Amazon.in are close in India with Flipkart being the marginal leader. With the acquisition, Walmart will now be bigger online than Amazon in at least one country.

I wonder what the other global majors are thinking about all this. Carrefour and Tesco, the old European giants, are not present here at all.  OK Tesco is , via a joint venture, but you would be hard pressed to find a store. The newer European upstarts Aldi, Lidl, et al, can't point to India on a map and so, have not come. The Chinese, notably Tmall and JD seem to be interested only in slugging it out in home territory. Alibaba is of course more global in outlook, but they are  in the B2B space. So its just the Americans wanting to fight in India.

Where is the famous Ramamritham in all this. How come none of the rabble rousers are yelling their heads off against evil Americans ? The truth is that both Ramamritham and the political worthies are old foggies. Neither know how to switch on a computer, let alone how to buy anything online. Events have overtaken these dinosaurs before they have realised what's happening. The same thing happened with the Indian IT industry a couple of decades ago. The only way to beat Ramamritham is with something he does not understand.

So now the war will begin. This blogger is salivating at the prospect. You see, he is a piddling customer of both Amazon and Flipkart. "When elephants fight, it is the grass that suffers",  goes the old saying. I beg to differ. When these two elephants fight, it will be the grass that will flourish. I am looking forward to all the lovely deals and freebies !

Read More

The quintessential bureaucrat

All bureaucrats are the same, but some are better than the others ! Each nation is blessed with a liberal sprinkling of "homo sapiens pointless bureaucracy-ensis". But the ancient land of India is surely the world leader in this matter. Meet Ramamritham - the quintessential member of this species.

Readers of this blog will know of my partiality to caricaturing a typical member of a group by a name. The Indian female has featured here so often that her name is now acquiring legendary proportions (pun intended). Having been accused of gender bias, I shall now strive to correct it with describing the masculine equivalent.

India abounds in Ramamrithams. Typically he comes from the state of Tamil Nadu or West Bengal - these two cultures seem to have a huge affinity for inhabiting the corridors of babudom. He takes great pleasure in designing the most elaborate and pointless of procedures. He squeals with orgasmic delight when he has the opportunity to add one more procedural step in an already lengthy treatise on pointlessness. The more the paperwork, the greater is his joy. The airport procedures that I alluded to here and here were designed by a particularly bright specimen of this tribe. He has also been behind the need to wave your photo identity card every 5 minutes at all and sundry - I think he is protecting you and me from an acute case of amnesia of our names and how we look. We shall pass lightly over the fact that being forced to look at my photo every now and then and being reminded of the passage of years is not improving my mood.

You can't escape meeting him. If you want a mobile phone, he's there. If you ask for a gas connection he's there. If you want a passport, a credit card ......, actually anything at all, you will have the full pleasure of meeting this wonderful man. If you are returning from abroad, and have to pick up the pieces of living in India, you will have the privilege of cohabiting with him intimately for a long time. Its now 4 months since I returned back, and he still hasn't left my house.

His latest fancy has been to give me his full attention in the small matter of obtaining a new credit card. He has decreed that not only should my address be verified, but my phone lines have also to be verified. Fair enough. Call me on my mobile, and you can verify it easily enough. He then wants to check on my land line as well. But then, our Ramamritham works only from 11.00 to 4.00 Mondays to Fridays. At that time, I am, alas, away toiling for my daily bread. Tring Tring he rings. No answer. He then calls me on my mobile and complains that I am not answering the landline ! Explanations of lack of geographical proximity don't cut much ice. Right; he can sit on my application grandly. As with wine, the older it gets, the sweeter it is.

I have movingly expressed my willingness to coo sweet nothings to him anytime on Saturday or Sunday , but weekend romance does not seem to catch his fancy. I have offered to bring the sainted instrument for him to caress in person, but his idea of intimacy does not seem to extend in that direction. I have even offered to overdose him with his first love - enough paper - to prove that the landline number is indeed mine , but he refuses to be titillated even by that ruse. He is steadfast, upright and represents the best of his tribe.

I hereby award the gold medal in bureaucracy to Ramamritham. May he flourish and conquer many new heights. May he continue to bring laurels to the country. And , no doubt, he will appear time and again, in this humble blog.

PS . All characters in this post are entirely fictional and the subject of this blogger's imagination and have no resemblance to any person living or dead.

Read More

Taxing Times

The season for tax returns is just over in the US. Its just beginning in India. Appropriate time to rave and rant on the nonsensically complex process of making out a tax return. No, I am not a tea party activist (I drink coffee and in any case, I wouldn't be seen dead with that rabble). I am just venting steam ahead of having to sit down and do the damned thing. Thankfully I only have to do an Indian tax return, but that is torture enough.

Everybody knows that the famed Ramamritham absolutely loves Income Tax. Great opportunity for framing fiendish rules and impossibly complicated forms to fill. Just consider the following evidence.

The first problem is to decide what form to fill. There are no less than 8 different forms you can fill. It all depends on whether you are a HUF or a BOI or a AOP. What if you can't figure out what those are and if you figure you are just a human being ??? Not sure - In Ramamritham's lexicon, normal human beings don't exist. 

With delicious irony, he has designed a from called Saral for dullheads like you and me (OK OK, just me). Saral in Hindi means easy.  Never mind that the form appears to be intelligible only to a rocket scientist. When somebody pointed out this irony to him, he promptly renamed it Sahaj, which is just a complicated form of the same thing - simple !!

Of course the normal calendar  is just too "saral". So came the innovation of April to March. For that we have to thank Sir Humphrey Appleby, forerunner and idol to Ramamritham. Something as simple as a calendar year is of course anathema to these venerable gentlemen.

He expects you to fill the return for something called "the previous year to the assessment year". So the assessment year is supposed to be the next year into the future so that you can file the return for the previous year !! I am now supposed to file the return for assessment year 2011-12, declaring income for the previous year 2010-11, corresponding to my financial year which is also 2010-11. Whoever dreamed of this concept deserves the highest accolade of Ramamrithamology.

As for the Form itself, I defy any sane human being (Chartered Accountants are not classified as sane! ) to be able to fill even one item. Other than the question, are you male or female, that is. Take this one for example.

"Long- term capital gain where proviso under section 112(1) is applicable (Without Indexation)-Code in SI Schedule is 22, Tax Rate is 10% ;Enter only positive value from Item B4c of Schedule CG AFTER loss adjustment under this category in Schedule CYLA and BFLA, if any. "

One of the fundamental principles of any legal system anywhere in the world is Ignorantia juris non excusat (Ignorance of law is no excuse). Somebody should file a case saying this principle has been breached by the Indian tax law - surely human brains haven't evolved to the point where they can begin to understand the Income Tax Form.

Read More

47% vs 97%

Mitt Romney is in a  soup over his 47% remark. In some remarks he made at a private meeting he said that 47% of Americans do not pay income tax (fact) and implied that these were scroungers (rubbish). But he was factually accurate in that 47% of Americans do indeed not pay income tax - although to be fair about that half of that lot do pay payroll taxes which is a form of income tax meant for funding social security and Medicare.

The purpose of this post is not to wade into the political controversy. But simply to point out the fact that if Romney were in India, he would say 97% of the population does not pay income tax. That's right - only 2.8% of Indians pay any income tax .

That's not to say 97% of the population does not pay any tax at all. Indirect taxes like VAT, Sales Tax, Octroi and a whole host of devilish taxes are levied on everything. Even a beggar buying beedis is paying all these taxes. But income tax, the largest revenue earning component of the budget is paid by only 2.8% of Indians.

Of course, this is a headline grabbing statistic that somewhat obscures the facts. India is a young country with a large number of children. They obviously are not meant to pay taxes (although I am somewhat loath to mention this as Ramamritham might pounce on the idea and design a tax for them). But clearly there is something very wrong in the Indian taxation system.

Surely so much of India is not dirt poor. The fact is that lots of people dodge taxes. Perhaps the true number of those who should be paying taxes is three times this number. Still, even if you say by rigorous enforcement of the law the number of tax payers would rise to say 9% - three times the current number, even then this is awfully small. How can a country which wants freebies and subsidies for everybody be financed largely by just 10% of its population.

Three things are blindingly obvious

- Economic growth for everybody should be the single most important priority of the government and society ; millions must be given the opportunity to earn enough income that they pay taxes. If ever there was a case for learning from the China model, this is it. Get rich first; then worry about income distribution.

- Tax evasion is clearly rampant. Here Ramamritham is indeed trying hard, but the scale of the problem beggars belief

- Tax exemption for agricultural income and long term capital gains has to go. If you earn sufficient income, whatever the source may be, you have to pay income tax.

You can only soak the 3% so much.

Read More

Sox and smelly feet

Remember the Sarbanes Oxley Act ? The one that was promulgated in the aftermath of Enron. This was supposed to ensure that accounting scandals are greatly minimised. The Act that had every business chief howling that it was draconian , that compliance was putting a huge cost on business, etc etc. Well, it turns out that investors, whom the Act was supposed to protect, actually don't care all that much about accounting scandals.

Take the case of the "success" of many of the Chinese IPOs in the US market. In the fine print , most of them have disclosed accounting deficiencies. But does the market care ?? Not one bit. Take Renren which IPOed yesterday. The stock rose some 50% above the issue price. Never mind that the Chair of the Audit Committee resigned on Tuesday, they changed a key growth figure, they disclosed a "material weakness" that they did not have enough people in their accounts department and a "significant deficiency" that they had no policy on the treasury function and investment of cash.

Material weakness and accounting deficiency are Ramamritham speak. The former means the accounts are definitely wrong. The latter means that it is most probably wrong.

And yet investors seem to care two hoots. These days anything with a China name will sell like crazy. Even if they presented their accounts in Chinese and qualified it by saying that they just made it up to satisfy a legal formality.

Even the famed General Motors IPO showed a material weakness in the accounts. Didn't come in the way of its much touted success.

I am sure that the Public Companies Accounting Oversight Board ( what other name can you expect Ramamritham to dream of), that was supposed to regulate auditors under the Sarbanes Oxley Act has done enough research to prove that disclosures of accounting weaknesses have had a positive correlation to the share price and therefore they should be considered as having done great benevolence to the human race. It is probably true - the research finding that is. But as long as cases like Renren exist, its hard to take Sarbanes Oxley seriously.

Sure Sox, does reveal smelly feet. But if gorgeous blondes find smelly feet sexy, there's not much that can be done about it.

Disclosure : This blogger has made merry with the aforesaid Act; making a fair bit of money for his company from it. His opinions are therefore completely biased.

Material Weakness : This post is utterly without research, written on a whim and totally opinionated.

Read More