India Positive

by Chetan Bhagat

  Among the many lame arguments against selling Air India is the one that reminds us that it is the flag carrier. Well, many countries no longer have flag carriers (including America). In other cases, they don’t cost their governments so much. Flag carrier pride in a passenger airline is stupid. Air India is not the Indian Air Force.

  Air India’s role in rescue efforts is also tom-tommed by these naysayers. Well, it beats all logic to keep such an expensive operation on standby for occasional rescues. It is a better idea for the Centre to give money to private airlines in such emergencies. Do we really think that in the event of a rare, genuine calamity, if the government wants to pay to hire a plane for rescue operations, IndiGo and SpiceJet are going to refuse? And isn’t this far more efficient than burning ₹7,000 crore a year?

  These two noble arguments hide the real reason we’re keeping Air India alive. It is the netas’ and babus’ club in the sky. Politicians and bureaucrats, along with their families, friends and neighbours, abuse Air India to get free upgrades and slavish service from the staff. Taking Air India off the government’s hands will end these VVIP joys.

  Even if we want to pamper netas and babus, there are cheaper ways. Paying them money to fly business or even first class in private airlines will be less expensive than keeping the Air India monster alive. The government can buy upgrade vouchers for its senior functionaries.

  So how does one sell Air India? Its assets, office infrastructure, running operations and landing rights have some value, though well below its debt. The government should give it to the highest bidder among various private players. Of course, the bid is unlikely to pay off the entire debt, so the winning bidder will probably be someone who wants the least discount on the loan.

  Employees may be retained or retrenched; that is up to the buyer to decide. But a decent retrenchment package (say, three years’ salary) for the entire staff would cost around ₹9,000 crore (given a salary bill of ₹3,000 crore a year). The new buyers will take that into account in their bid.

  Even in an ideal scenario, the government will have to give a discount on the loan. It may even have to give the company to the new buyer for one rupee. The sale will not make the government any money. But it will get rid of a part of the loan and the whole cash-burning enterprise. To that extent, this exercise would be not so much a sale of Air India as good riddance. This is something we need to understand going into the transaction, so we don’t have unrealistic expectations from it.

  Beware opposing voices that will complain about the sale, ‘We sold Air India for nothing.’ Tell them: we didn’t sell it, we got rid of it, and that will save us a lot of money every year.

  Let’s all keep up the pressure to ensure that the Modi government sells Air India. We will be doing the country’s finances a big favour.

  @chetan_bhagat

  Am all for fiscal prudence but to overtax fuel and then spend thousands of crores paying for Air India’s losses and funding bank NPAs also doesn’t seem to be the best way to do things.

  94 replies/ 190 retweets/ 1,028 likes

  @chetan_bhagat

  A bit surprised that skill based certificate programs offered by educational institutions are subject to 18% GST. Most countries don’t have it. Govt should consider making education GST free.

  249 replies/ 1,060 retweets/ 4,716 likes

  How to Tax with Love

  These are ten ways the income tax department can reform itself to get taxpayer buy-in

  Startling income tax data was in the news in 2016: only 1.2 crore Indians (one per cent of the population) pay income taxes. Checks with the tax department revealed that the data was somewhat unrepresentative, as it only considered taxes on salaries. The number of individuals paying taxes is close to five crores or 4 per cent of the population.

  At the same time, the tax department did confirm that the number of individuals claiming to have an annual income greater than ₹50 lakh is only 150,000, in a country of 120 crore people. Note that modest two-bedroom apartments in Mumbai suburbs alone cost ₹3 crore. One wonders who is buying them, isn’t it?

  Hence, the tax department’s assertion that there is a significant amount of tax evasion in the country may not be incorrect. And the so-called hostility with which our tax officials approach taxpayers is somewhat justified. They could argue that they would not have to be so rough if people only behaved.

  At the same time, there are constant reports of genuine taxpayers claiming harassment and persecution by tax officials. The tax department, many income earners say, starts with the assumption that the taxpayer is in the wrong, deliberately complicates rules, and comes after you only because you decided to pay your taxes (while ignoring or remaining blissfully unaware of the real tax evaders).

  As the Indian economy gets bigger, invites more foreign investment, and tries to expand its tax base, some things need to change about the way the tax department does its job. It is one of the few government departments that is in constant touch with citizens. If it continues to operate in an archaic and hostile manner, the benefits of policy reforms will never accrue to the economy. Here are ten concrete, doable ways the income tax department can tax, but with love.

  First, treat the taxpayer as a customer. The current tax department mentality is to act like the police and approach the taxpayer as a criminal, guilty unless proven otherwise. It is tough for people to part with their money. The last thing you should do while taking it from them is to be ungracious about it. Without the taxpayer, the government can’t function. Seeing the taxpayer as a customer means taking constant feedback, having service benchmarks (turnaround times, for example), and not presuming guilt.

  Second, simplify forms. The government has tried but sadly failed to do this. The Indian tax department should download some forms from the Hong Kong or Singapore tax department websites. These are some of the simplest and most effective tax forms in the world. Please emulate them.

  Third, design a good, robust and modern website. India is the land of IT companies. Hire a good company to revamp your customer interface. Again, if you see the taxpayer as a customer, you will approach the website differently. The layout, the downloads, and the language used, should all change. Yes, get an app too.

  Fourth, good quality paper. Current tax department communication seems stuck in the 1980s, with cheap super-thin sheets and envelopes, and poor-quality black and white printing. Come on. We are one of the world’s top economies.

  Fifth, simpler nomenclature. Terms like ITR4 and 26AS intimidate people. Sit down one day, and rename and reorganise all the forms that have been amended and cluttered with complex nomenclature over the years. It’s scary enough to pay taxes. Don’t make it scarier.

  Sixth, say thanks and mean it. People who pay taxes are nation-builders. Seeing all rich people as thieves is a throwback to the evil-landlord-and-poor-peasant movies of the 1970s. You don’t only become rich by stealing from the poor. You could also generate wealth from creativity, innovation, hard work and enterprise. How can you punish people for that? The top 10 per cent of the country’s taxpayers should actually get a nice letter and memento (not cheap quality, please!) from the IT department.

  Seventh, don’t send scary letters. Yes, the department officials are under pressure to increase revenue. However, you cannot scare taxpayers. For instance, the kind of letters that say, ‘We believe that, the way things are going, you should make 20 per cent more money this year, so we hope you will (and you’d better) pay that much more tax.’ Really? Do we need to be so intimidating?

  Eighth, set up tax guidance centres. People should have a place to go to figure out how to do their taxes, where they don’t need to hire a private advisor. Organise taxpayer training at enquiry and guidance centres that run well. Again, make sure they’re nice. They should not be like sarkari torture chambers with endless waits and creaky fans. This is the last government department that can claim it doesn’t have money.

  Ninth, share macro data. Without revealing in
dividual details, macro data should be shared with the public to enable us to understand how tax collections are going.

  Tenth, tell taxpayers how their money is being used. Of course, funds are amalgamated at the top. However, it would be nice to hear that the tax I paid last year helped make this road.

  As Veda Vyasa said in the Mahabharata, a king should collect taxes like a bee collects nectar from flowers—painlessly. It is about time we behaved like a modern, world-class economy when it comes to tax collection and learned to tax with love.

  ‘Suit-boot Sarkar’ Doesn’t Want the Rest Suited and Booted

  The country needs a shift from pseudo-socialism to a healthy capitalism in its government policies

  So, it is official. We are a socialist country. When the so-called right-wing and pro-business party delivers a populist budget, with an eye on the fattest vote banks (the rural poor and the farmers this time), you know India is a long way from being a capitalist nation.

  Many experts have analysed the 2016 budget. The positives, most agree, are a certain restraint in keeping fiscal spending in check, and a push to rural infrastructure. The glaring negative is the lack of big ideas which could truly transform our economy, spur new investment, and create jobs.

  The government seems to have forgotten its poll promises, particularly to the educated youth of this country. The middle class—the hardworking, tax-paying millions (who ironically supported the BJP in the last election)—were gouged further. It must have been a rude shock to learn that their pension savings would be hit with another tax, not to mention a few more surcharges and cesses, scraping out their already-lighter wallets. In other words, this was not a BJP budget. It was a UPA cut-and-paste budget. Worse, it was one of the lacklustre UPA budgets. If the BJP had been in Opposition, they would have criticised this budget. They would have called it dull, boring, populist, anti-business and anti-middle class.

  Well, such is political life. You promise voters something before the election and they vote for you. Then you don’t need them anymore, and you ignore them. This is what the Congress did. This is what the BJP is doing. It is just sad that the BJP didn’t even spare two of its most loyal supporters in the 2014 polls—India Inc and the youth.

  Why did the BJP do this? It lost a few state elections. So it sat down and did the math. Farmers and poor people are greater in number. So let’s target them this time, it decided. Let’s create a poor vs rich and poor vs middle class divide. In other words, let’s not talk about a good Indian budget, which is good for all, rich and poor. No, we must always milk the poor vs rich narrative, and then skin the middle class and the rich some more.

  Sounds familiar? Well, the Congress has done it quite successfully in the past. Had it not been for the monumental scams, this narrative might even have kept them in power. AAP is trying to do it, and is quite good at it as well. Now the BJP is trying to do it too, and letting down the country’s youth and the business community quite shamefully in the process.

  The party’s over: India’s youth will need millions of new jobs in coming years. Where will they come from?

  For business is still hard to do in India. For example, try to open a small café in Mumbai. You may be passionate about serving good food, but unless you’re passionate about hustling the BMC and half-a-dozen other government entities for permissions, you had better give up. Even if you do open that café, your middle-class customers will be taxed on the bill amount, which they pay from their already-taxed income. Thus, they will think ten times about eating out, especially since their car runs on petrol that is taxed at over 100 per cent, despite oil prices being at historic lows.

  The politician will say, but why should I care for these café owners and middle-class diners when I have millions of poor people to think about? Well, when you make business hard and dining out unaffordable with your taxes, there will be no café. When there is no café, there are no jobs at the café. When there are no jobs at the cafe, many of those poor people stay jobless. Thus, overtaxing business and middle-class consumption actually harms the poor. It, in fact, keeps them poor.

  What we call pro-poor in India is usually pro-poverty. Capitalism works on the premise of incentivising private individuals to make money, and thus increases consumption as well as jobs. However, no political party in India believes in this, for socialism is a much easier sell. Even for a right-wing party like the BJP. They don’t want to be tagged as a suit-boot ki sarkar. So they have joined the rest in making policies that ensure India never gets suited or booted.

  A rags-to-riches Indian billionaire once told me, ‘In India, we are now habituated to being poor.’ Maybe he was right. Poverty can be addictive.

  As for the youth of this country, the ones who still have dreams and want India to give them the opportunities to fulfil them … sorry, we are not ready yet. There’s still too many of us who believe in poverty and socialism. No neta will go against that tide, no matter what they say in their poll speeches.

  So, if you really want change, don’t just back a political leader or party. Spread the message of good and fair capitalism in this country. Until enough people are convinced that this is the way to go, no politician will ever do anything about it. In the meantime, try to get a job. There aren’t going to be many of them going around in the next few years. And whether the BJP will have a job in 2019 or not, well, that’s another discussion, isn’t it?

  @chetan_bhagat

  Chetan Bhagat Retweeted Elon Musk

  The govt should note that the world’s biggest CEOs of the most innovative companies want to be in India but find the regulations too hard. They bring with them investments and jobs. Regulations must not be a hurdle to that.

  97 replies/ 517 retweets/ 1,976 likes

  Free Basics May Not Be Totally on the Mark, But Don’t Trash It

  Initiatives to open the internet up to more people around the world must be encouraged while addressing legit concerns about free and full access

  Before I begin, let me confess that I am a bit of a Mark Zuckerberg fan. Who wouldn’t be? Harvard dropout creates internet startup, and turns it into one of the most valuable companies in the world. Facebook has a billion-and-a-half-plus active subscribers. People are addicted to FB, where they can spend hours every day tracking their friends’ lives. Mark changed the world in the coolest way imaginable. He never forced anyone. Yet, he attracted everyone to his creation. Soon, he became a billionaire. Then, he did something even cooler. He pledged 99 per cent of his $45 billion fortune to charity. It’s a staggering amount (around ₹300,000 crore) to give away. All this, and Mark is only thirty-four. I think, for all practical purposes, he is the coolest person alive.

  Why is this important? It is because Mark is backing an initiative called Free Basics (earlier known as internet.org) which will supposedly help connect more people in the world to the net. Free Basics involves collaborating with existing telecom companies in developing countries where internet penetration is still low. Telecom companies already connect people in these countries with voice services on the phone. Many such people cannot afford data services, so they are cut off from the world of the internet. A quick way to connect them is to offer them free internet, customised to a few chosen sites which will be designed for lower bandwidths. The telecom companies and site owners will work out between them how the subsidy is absorbed.

  So far so good. Who can argue with poor people being given free internet access? Even if it’s slower, it’s better than nothing, right? Even if Free Basics only allows you to visit a few sites, isn’t it better than not having access to any sites? But this is where it gets tricky. This limited range of sites is at the core of the opposition to Free Basics. Which are those sites (FB is the main one, of course)? Who will be the gatekeeper that selects those sites (FB seems to be the one)? If only a few sites are allowed, won’t owners of excluded sites suffer as they would then have a smaller user base? Won’t the new netizens be denied competitive choices—online retail options and m
edia content, for instance?

  These are real issues. Thankfully, the internet has not been regulated so far in terms of which site will be allowed which customers. Imagine Google being asked by regulators to pay up for every net user they reach in India. Just like spectrum, what if internet user access begins to get sold? It is possible. But it will kill the internet as we know it. Right now, any small startup can hope to create a killer website and reach the entire world (Facebook did exactly that).

  If governments or corporations regulate user access, only the big players can dominate the internet. They already do, but this domination isn’t imposed or coercive. You choose Facebook, and that’s what makes it cool. The Free Basics initiative, though cool in its intentions to connect the world, lacks coolness when it restricts the sites available to users. It also sets a dangerous precedent, for soon it will be okay to make only a certain part of the internet available to a certain set of users (based on pricing, the location of your country, and so on).

  Free Basics proponents counter these charges with: how does limited access matter when we are providing internet access for free? Those who want the whole range of sites (essentially, access to the entire internet) can always take a paid plan. Besides, exposure to a few sites will only whet the user’s appetite for more internet, and they are likely to buy a data plan sooner rather than later. Also, in a free market, if Facebook or any other company tries a monopolistic stunt, it will be exposed. These are valid arguments too.

  Overall, Free Basics has issues. However, to throw the idea away altogether doesn’t seem to make sense either. A lack of understanding of this complex project has led to Free Basics opponents painting Mark as a control freak and Facebook as the evil MNC empire. Its PR blitz (somewhat over the top, with expensive ads featuring poor farmers) alone has created detractors. ‘Such expensive ads show there must be an ulterior motive’ is not really a logical statement, however. There are win-win situations too, in life, and one can probably trust Mark more than many other businessmen out there.