Dividend and Income Tax.

Link to the article in ET is here.


It is time dividend earned beyond a cut off limit of Rs 1 crore and above should be brought under Income Tax net. A salary income of Rs 1.80 lakh is taxed. Out of this income, the person has to maintain family, take care of medical expenses, education of children and all sorts of expenses which include bribing to get small things done. It is difficult to understand Indian Taxation policy. Those who earn very high income beyond the imagination of ordinary people silently enjoy and talk of morals and ethics. politicians and bureacrtas who make unaccounted money enjoy life at others cost and advise people to lead a simple life with high thinking. They also liberally quote Bhagavat geetha, Ramayana and Gandhian thoughts for people to follow. It is time for industrialists to voluntarily contribute for common peoples' welfare as the money they earn by way of dividend is in a way public money. Make education free as far as possible and see that common people do not struggle to lead a life having atleast two time ordinary meals. With inflation ruling high, poor people have no means to survive.There is no moral, economic and social justification to exempt dividend from Income Tax under the name of double taxation. Taxation policy and the implementation of the policy have done maximum damage to our economy and the people. Will the authorities have the conscience to compare the tax and income of the Rich and the Ordinary taking into account the inflation factor and the living standards?

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Along with tax cuts for employees and employers, it is desirable to introduce some tax incentives for savings.Economic security should precede social security and there should be some measures to aim for economic stability. The Government can think of creating a fund 'Economic Stabilisation Fund' by mobilising funds from all segments of the economy. There can be two parts for this fund ie Refundable and Non-refundable. The country has billionaires,millionaires, and large multi-national corporations with lots of wealth in the form of gold, real estates, huge reserves and cash balances. By providing some incentives , the Government should be in a position to attract a small portion of these resources either on a refundable or non-refundable basis. The economic recovery is in the interest of all and there should not be any hesitation to come forward to contribute. The Govt can also consider introducing some levies in the form of Speculation tax on large deals in forex, capital market, commodity market and others, greed tax on casinos and other gambling areas, luxury tax for owning and operating very high end cars more than two and aircrafts, extravaganza tax on consumption, entertainment, marriage, festivals etc. USA has all the resources, talent, expertise and skill and the present situation is only a temporary upset which can be easily overcome without much fuss. The political bickerings need to be kept aside and efforts should be made only on economic recovery.
Dr.T.V.Gopalakrishnan
(This appeared in ET Epaper dt/7/09/11

Rating and the Regulator's Dilemma:

The recent downgrading of US long term debt by S&P has created a scare among those particularly bankers who hold these assets in their portfolio as it may erode the realisable value of these assets in the short run and to that extent the soundness and safety get adversely affected. This rating, which has more of a psychological impact than that of a realistic situation, should not and need not affect banks soundness as the banks investments in such assets may not be that significant among its various other assets to worry about. The regulators interest generally is to ensure safety of each and every bank and it is for individual banks to diversify its assets based on its own assessment of various risks including market risk keeping in view and complying with regulator's guidelines. Overall stability of the financial system is the concern of both the Government and the Regulator.

The US economy can always bounce back from its economic crisis caused by heavy external debt fiscal deficit and poor GDP growth and it has all the potential and strength to put up a better show. The present downgrading should be viewed only as an eye opener and should help to review the economic policies so far pursued and initiate fresh policies in the areas of savings, infrastructure development, employment and taxation. The present approach More public Spending would stimulate demand needs to be replaced by more savings would lead to better investment, more employment opportunities, more spending and better GDP in the long run. It is a time consuming process, but end result would be lasting and enduring. It requires structural reforms in the area of taxation, income distribution, incentives for investment and generation of employment opportunities through creation of improved infrastructure in particular etc. Too much of debt would sound death-knell even if they are backed by assets.

Dr.T.V.Gopalakrishnan