Wednesday, 28 March, 2012

The rise of Regulatory Raj

The rise of Regulatory Raj

One of the most disconcerting aspect of the 2012 budget is the scant respect shown to the law of the land. By the Finance Minister, representing the Government of India. Headed by a Prime Minister who was the architect of the famous reforms that started the initial downfall of the Licence-Permit Raj.

When we enter into a contract - oral or written, we agree on a basket of terms. When we violate those terms, the other party can (and often will) take us to court. Normally, the courts will hear both sides out and come to a conclusion and pass a judgement. And after all appeal options are duly exhausted, the matter rests. This is the single-most vital aspect of any functioning democracy. The sanctity of the rule of law. One of the most important tenets of any law is that any enactment comes into effect on a prospective basis. And NEVER on a retrospective basis.

It is like one team having finished batting its quota of 20 overs in a T20 cricket match, and when the other team comes in to bat, the team batting second announces that the game has been converted into a 50-overs match, and they will have 50 overs to achieve the target! To any normal cricket fan, this will sound so crazy that it will be considered beyond the realms of possibility.

When a thief or a rogue scamster or a criminal breaks the law, it is only to be expected. And he / she is perfectly aware that if and when the law catches up, he/she will pay the price for it! However, when the persons who are supposed to uphold the sanctity of the law in high esteem do precisely that, we're beginning to wonder what's happening to our democracy.

Unfortunately, our "otherwise extremely wise" Finance Minister has chosen to do precisely that in his 2012 budget.

Apparently, our FM has broken all previous records when it comes to the number of retrospective amendments. And many of them are in a manner increasing the "discretionary" powers of people like Income Tax authorities. Considering the prevailing moral standards, this obviously would lead us to believe that rent-seeking would increase (in a layman's language, bribe-seeking would increase).

Take a look at this nice article on the subject by Haseem Drabu, a well-known economist and an ex-banker:

For those of you who want a sample, don't just think of Vodafone, the most obvious one. An interesting sample of retrospective amendment is that in certain specific cases, the FM has authorised the Income Tax authorities to reopen the Income Tax returns of upto 16 years. Yes, you heard that right. Sixteen long years! Till the other day, the corresponding figure was less than half that duration.

I've got a hypothetical doubt (which may not be so hypothetical for many of you):

Suppose that a particular individual has chosen to destroy all his Income Tax-related records which are over 10 years. If this individual's case is taken up for the aforementioned scrutiny and if the IT authorities wish to go through the last 16 years records, what are the options before such an individual???

To my mind, it is obvious. Unfortunately, the obvious solution is not within the realms of what's considered legal or ethical. The legal or ethical option, of course, would be to go to the courts. And the individual may well die of old age before he comes out of the case!



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