Sir, please take a look at the investments which happened in IT parks and SEZs compared to other parts of the same city (initially; gradually all parts of cities develop). You will easily understand the motivation.arnab wrote:
Saar hand waving is not a substitute for analysis (neither is quoting newspaper reporters). Please ask yourself the following questions - what is the motivation for investing in a particular location? How critical is tax exemptions in this decision making?
Tax incentives are a big incentive for investments. Please look at the history of investment in wind turbines in India. Most investments were made due to accelerated depreciation available. This is similar in other countries.arnab wrote: Finally - you will need to prove that without tax incentives companies will not be willing to invest in the country and create jobs (specially when it has been repeatedly shown that tax incentives are not critical for investment).
I did not argue against taxation! i said if tax levels are too high, people will lose motivation to work harder.arnab wrote: Also - regarding whether governments have the 'right' to tax people - I'm afraid they do. Who was it that said - "taxation is the price we pay for living in a civilised society"? Alternatively - you are free to vote with your feet and move with your family to the tax free utopia of Saudi Arabia
Saar are you claiming that the tax incentives associated with IT parks and SEZs were all that was required to boost investment? If that was the case why not turn the entire India into one big IT park and SEZ and provide the same tax incentives to the whole of India? Investment will automatically boom no?alexis wrote:Sir, please take a look at the investments which happened in IT parks and SEZs compared to other parts of the same city (initially; gradually all parts of cities develop). You will easily understand the motivation.arnab wrote:
Saar hand waving is not a substitute for analysis (neither is quoting newspaper reporters
The withdrawal of SEZ exemptions caused a lot of investments plans to be dropped. I dont need IMF to tell me otherwise; i have witnessed this myself in my profession.
Tax incentives are a big incentive for investments. Please look at the history of investment in wind turbines in India. Most investments were made due to accelerated depreciation available. This is similar in other countries.arnab wrote: Finally - you will need to prove that without tax incentives companies will not be willing to invest in the country and create jobs (specially when it has been repeatedly shown that tax incentives are not critical for investment).
Investments will happen if there are returns; If tax incentives create returns higher that cost of capital, investments would happen.
I did not argue against taxation! i said if tax levels are too high, people will lose motivation to work harder.arnab wrote: Also - regarding whether governments have the 'right' to tax people - I'm afraid they do. Who was it that said - "taxation is the price we pay for living in a civilised society"? Alternatively - you are free to vote with your feet and move with your family to the tax free utopia of Saudi Arabia
U said they will have no effect! The fact that investment is happening in these areas and not in surrounding areas show the effect of taxes on investment decisions.Saar are you claiming that the tax incentives associated with IT parks and SEZs were all that was required to boost investment? If that was the case why not turn the entire India into one big IT park and SEZ and provide the same tax incentives to the whole of India? Investment will automatically boom no?
Welcome back Ji. Was starting to miss the Comprehension capabilities .arnab wrote:Yes that 'tax levels are too high' chestnut has been around for a long while - known as the laffer curve. Unfortunately no one has been able to figure out how high is too high.
Saar that is why I asked - if it was so easy then why does GOI need to go for this 'special' economic zone shone business? All it needs to do is extend those facilities to the rest of the land. As the IMF /WB papers showed - Tax incentives are not significant. What you need (and what SEZs offer) is ease of doing business - single window clearances, good infrastructure, no crazy labour regulations. These are the critical issues for investment - not a bunch of alterations to the tax code. Since unfortunately those cannot be provided to the whole of India - GOI has created SEZsalexis wrote: U said they will have no effect! The fact that investment is happening in these areas and not in surrounding areas show the effect of taxes on investment decisions.
If the Govt is willing to provide tax incentives in whole of India, investments will obviously improve; this has been resorted by many nations. However as you said "taxation is the price we pay for living in a civilised society" and govt wont be able to provide the basic services for any civilised society.
Well the easiest place to look would be the US when Laffer made these suggestions to Reagan. Taxes were reduced - and the US wound up with some of the largest deficits in history around that time. People forget this of course - also given that the US had a recession in the early 80s, the US govt deficits were perhaps quite welcomevina wrote:That said, it amazes me why the Dilli E-Con-O-Mix ding dongs can never actually look at real life experiences and readily available data and make intelligent and sane conclusions, but rather persist with some grand theories and their imperfect applications (and oh.. then magically that imperfect applications become "true", because they are backed by "theory" and "science" . haa. haa. and hence true!), while experiential and real world studies make for far better basis of decision making and a good reality check , because they are based on actual real world experiences, and not pulled out of some Dilli-Ding dong's (St Stephens, JNU, DSE,ISI kind of place) Musharraf!
In plain Inglees.. Why don't we look around the world and see economies and regions that closely approximate ours. (I would suggest, ASEAN , China and S. Africa , Brazil), see who we compete against the most (ASEAN and China) going forward and benchmark our taxes and business costs to those! Zimble, Easy, Clean, based on reality. Oh no, but that would not be "scientific" for the Dilli Ding-Dongs would it ?
Lo Ji . I said like/similar/"Humsaaya Mulk" ( ..oops that does not mean Paki Land) and said ASEAN and China and you go all the way to USA , why because Laffer Baba was Amreeki huh ?Well the easiest place to look would be the US
The government is planning to set up a Rs.40,000-crore flexi-fund to help states address specific rural development needs.
The fund will be available to states from the next financial year till the end of the 12th Five-Year Plan in March 2017. The central government will have a 70 per cent share in the fund.
"For the first time, we are putting together a flexi-fund of Rs.40,000 crore that will be available to all states to spend on rural development scheme," Rural Development Minister Jairam Ramesh said at a joint press conference with Planning Commission Deputy Chairman Montek Singh Ahluwalia.
The minister said the fund would ensure better targeting of state-specific projects.
"The fund will ensure better targeting and the states will be free to use funds as per their requirements," Ramesh said.
The fund would be available as an additional amount that can be spent either on existing centrally-sponsored schemes of the rural development ministry and the drinking water and sanitation ministry.
The 12th Five Year Plan (2012-17) has proposed an allocation of Rs.490,000 crore to the rural development ministry and Rs.100,000 crore to the drinking water and sanitation ministry.
Ahluwalia said there is a need for a restructuring of the existing rural development ministry schemes, saying that those "need to be made more flexible".
"We are taking a fresh look at social sector schemes," he said.
Different states face different development challenges and Ramesh had spoken against "too much centralisation" in the programmes.
"The biggest problem today is that all rural development work is based on national guidelines that cannot take care of the specific problems of states," reports had quoted him as saying earlier.
His ministry believes the setting up of the flexi-fund would send a powerful signal about the government's commitment to cooperative federalism.
The fund proposal would be placed before the cabinet for approval.
It would be nice to say these funds are only available for specific purposes within villages, for example building of toiletsnawabs wrote:Government plans Rs.40,000 crore fund for rural development
http://in.news.yahoo.com/government-pla ... nance.html
I don't think this is strictly correct either. Everyone pays taxes in India. Just not income tax due to low income base. Since we have both a CST and VAT everyone pays both state and central tax. It is a regressive tax as poor pay more tax as a portion of their income.nachiket wrote:India's problem is the miniscule tax-base, rather than the tax-rate.
Then what about those especially corporations who payvera_k wrote:By that logic, those who pay income tax in India face double taxation, since they don't get to deduct CST and VAT from the income tax they pay. The USA is a tax haven compared to the outrageously high tax rates in India.
Professional Tax.Salt-to-software conglomerate Tatas have become the country's first business house to attain USD 100 billion revenue, even as the group's profit slipped to near USD five billion in the last fiscal year.
The total revenue of the Tata group, which has over 100 companies including 31 listed entities, rose by about 20 per cent in the last fiscal 2011-12 to USD 100.09 billion, from USD 83.3 billion in the previous year.
arrey vina ji - even Laffer ji didn't try to posit a relationship between investment and tax rates - so why go there ji?vina wrote:Lo Ji . I said like/similar/"Humsaaya Mulk" ( ..oops that does not mean Paki Land) and said ASEAN and China and you go all the way to USA , why because Laffer Baba was Amreeki huh ?Well the easiest place to look would be the US
Why go there ji ? Why look at our OWN record. We once had 99% marginal rates, including wealth tax and inheritance tax and ding dong tax and everything that the St Stephens /DSE/ISI/JNU pedigreed Oxbridge returned Bablog could vaccuum up from their class room notes in those places and we had piss poor investment rates. A marginally better investment climate and A DROP in tax rates, saw massive pick up of investment and growth.
because of interaction of so many factors that impact on tax revenues.No doubt that "window clearances, good infrastructure, no crazy labour regulations" are important. We are talking about taxes influence on investments, other thing remaining the same.arnab wrote:Saar that is why I asked - if it was so easy then why does GOI need to go for this 'special' economic zone shone business? All it needs to do is extend those facilities to the rest of the land. As the IMF /WB papers showed - Tax incentives are not significant. What you need (and what SEZs offer) is ease of doing business - single window clearances, good infrastructure, no crazy labour regulations. These are the critical issues for investment - not a bunch of alterations to the tax code. Since unfortunately those cannot be provided to the whole of India - GOI has created SEZsalexis wrote: U said they will have no effect! The fact that investment is happening in these areas and not in surrounding areas show the effect of taxes on investment decisions.
If the Govt is willing to provide tax incentives in whole of India, investments will obviously improve; this has been resorted by many nations. However as you said "taxation is the price we pay for living in a civilised society" and govt wont be able to provide the basic services for any civilised society.
Am a bit busy at the moment but will try to quickly respond to this. Presumably you are talking about the raft of concessions / subsidies allowed to companies through which they manage to lower their tax liabilities from the existing base level (the highest marginal rate being around 30 per cent) to something even lower to say around 22 per cent. If you think that is going to incentivise industry to invest more, IMO I do not think so.alexis wrote:No doubt that "window clearances, good infrastructure, no crazy labour regulations" are important. We are talking about taxes influence on investments, other thing remaining the same.
Since we are not able to offer "window clearances, good infrastructure, no crazy labour regulations" throughout India, we should atleast provide some other incentive for business, no?
However, please tell me why people route money through Mauritius than directly to India? Why is vodafone case is said to be causing investment in India to drop?
Please note that i am not arguing for reduction in tax rate per se. If the money so collected is utilised properly, i am all for it. However, it is the questionable means of distribution of this wealth through all the so called "rural schemes" that is causing me khujli...
Aadhar and direct payment should help in targetting the beneficiaries directly rather than fattening the pockets of the politicians and baboos that is the outcome of all these schemes
)True. But Laffer Ji, even with the US experience sort of "broved" (well in e-Con-O-mix, you can only "broove" and not "proove" with any amount of dignity as in physical sciences, but I digress, such is the nature of the beast) that the marginal tax rates in the US with all that "welfare ding dong hand outs and big gobmint " was too high, and even the current German boom has it's roots in the hard reforms to the socialist morass by the Socialists themselves (thank you Gerhard Schroeder, Frau Merkel must be saying) .The other Oiero trash of the Scandinavian variety followed suit (the Stockholm school of e-Con-O-Mix of Welfarists would be doing somersaults in their graves). The effect of taxes and it's distortions to the supply and demand curves and of course productivity are undergrad e-Con-o-mix text book stuff.arnab wrote:arrey vina ji - even Laffer ji didn't try to posit a relationship between investment and tax rates - so why go there ji?
What laffer ji said was that the relationship between tax rates and tax revenue for the government would be some sort of an inverted U, with a tax rate between 0 and 100 plotted on the x axis. Now neither laffer nor anybody else has been able to prove with any certainty of which tax rate hits the sweet-spot of maximising tax revenue for the gormint
Ahh.. But YumBeeYea Stratejee do not do "analysis" of the e-con-o-mix kind by assuming "Ceteres Paribus" (all else being same same/equal equal) or using JNU ding-dong Prabhat Patnaik's proclivities of throwing out words like "Dirigisme" or "Metropolitan" . They do realize that context matters, and "Ceteres Paribus" for the USA is very different from the "Ceteres Paribus" for Yindia and you cant do equal equal between the two, just because JNU ding dong decrees "dirigisme" and "ceteres paribus" . For eg, the second greatest invention of Yindoos after the Shoonya /Zero is something called "No Objection Certificate" aka NOC , invented by our own Babooos.. Want to build a toilet, GET AN NOC, want to plant a tree GET AN NOC, want to dig a well ..you get the idea.. Now when does anyone in the US get an NOC I ask you.arnab wrote:Now can I help it if MBA / strategee types think that there is a unidirectional relationship between tax rates and investment? In other words can you turn India into a zero tax rate paying country and wait for the messiah called private sector (and strong individualistic people) to take 'advantage' of this wonderful investment climate and provide all the goods and services that the people need? (after all you seemed to have worked out that a reduction in tax rates from 99 per cent saw a huge boom in investment in india, so therefore such a policy can continue for ever!). If not - given that India's tax rates broadly conform to the 'rest of the world' (including ASEAN region) already, how long do you expect this one-trick pony to continue to have an impact?
Ah, I see, India does not have "True Socialism" , but a corrupted version that calls itself socialism.Secondly - I know there is this groupthink on BRF that it is GOI's (congress) whatever's 'socialistic' policies that are keeping india down - unfortunately India does not have socialism, what it has is 'politics of patronage' (a throwback on our earlier feudal structure) which rewards a group of people through public tax funds for their continued loyalty. GOI has abrogated its responsibility of providing decent primary education and healthcare to its citizens. That role has been taken up by the private sector. This is not socialism in practice. The so called capitalistic countries are far more socialist than India's constitutionally defined socialism.
alas he broved nothing of that sort - Haven't you been reading what I wrote?vina wrote:True. But Laffer Ji, even with the US experience sort of "broved" (well in e-Con-O-mix, you can only "broove" and not "proove" with any amount of dignity as in physical sciences, but I digress, such is the nature of the beast) that the marginal tax rates in the US with all that "welfare ding dong hand outs and big gobmint " was too high.
US cut taxes - US deficits rose sky high. The whole growth story of the US in the 80s was a cyclical effect. GB Jr tried to follow the Reagan example and cut taxes even more. See the US today - structurally now taxes will never keep up with govt expenditure! This was never the case in the pre 80s. Some of the greatest industrial progress in the US also happenned in that era. Go figure.For eg, the second greatest invention of Yindoos after the Shoonya /Zero is something called "No Objection Certificate" aka NOC , invented by our own Babooos.. Want to build a toilet, GET AN NOC, want to plant a tree GET AN NOC, want to dig a well ..you get the idea.. Now when does anyone in the US get an NOC I ask you.
The thicket of mai baap red tape and regulations/mindless nuisance that accompanied the mai baap license permit raj largely exists intact in most parts and the reforms etc opened out only a minuscule area. Of course this thicket of mindless nuisance is the source of corruption and patronage and no wonder they cant get rid of it.
For eg, I just got back from Chennai, where they opened brand new modern abattoir with the latest and greatest cutting edge tech costing 60 crores , but cannot get it opened, because the "traditional butchers" are opposed to it, because they say they will go out of work (around 3000 guys, the new modern abattoir will employ 300 in 2 shifts with one shift for exports only).. Heck no, so, you need to eat meat in Chennai with the beasts butchered in primitive and unhygienic conditions in the name of "socialism" . So, Laffer Ji's "ceteres paribus" is very different from the Prabhat Patnaik's "dirigiste" "ceteres paribus" onree no ? So, you cant transfer the US experience circa 2012 to India of 2012, but rather broad ideas from the 1970s of the US to the 2012 of India !
Now the only thing I need to do is convince you it was your idea all along India is poor /inequal because it has borrowed the worst of capitalism and socialism. The US for instance has the worst record of poverty amongst advanced nations. This despite spending so much on social security. BTW - if you want to see the worst of capitalism - sub-saharan africa migt be a good place to start.3) Why is it that though India is socialistic (has it in the constitution), there is so much deprivation, inequality and lack of basic health education and shelter..
India never was truly Socialistic.. If only it was 'truly Socialistic' ... you get the idea now..
It's worth noting that these investments have been announced even before Walmart, Tesco and others have put a dime on the table. I believe this is known as the cascading effect of liberalisation.The company will spend 1.5 billion rupees ($28 million) in the year to March 31 to add more trucks and build warehouses, Joint Managing Director Vineet Agarwal said in an interview. The spending may help Transport Corp.’s supply chain division, which offers warehousing and packaging, to expand more than 20 percent annually through 2017, he said.
The operator plans to add 1,000 more trucks in five years, Agarwal said, as India’s decision to allow foreign investment in retail stores will help create more supermarkets and boost transportation of farm and factory products. Deutsche Post AG (DPW)’s DHL Supply Chain last week said it would invest 100 million euros ($131 million) to strengthen operations in the country.
The bolded portion of that quote explains why it's not economically feasible for private sector players (as well as the GoI for the matter due to fiscal prudence) to go out and build the farmgate infra in the hope that somebody will find use for it. The investment will happen only when there's a demand and that demand could and will come from the entry of multibrand retail players.“There’ll be investments in farmgate infrastructure once foreign supermarkets set up shop,” Agarwal said in New Delhi. “At that point, certain amount of logistics, including cold reefers and dry goods movement, will be required. We’re prepared to handle that.”
A dose of reality which ties in with I wrote at the start of this post:Entry of foreign supermarket chains will spur investments in warehousing, inventory management and computer systems, according to Zenith International Research & Academic Foundation in India. This will help reduce cost for retailers and boost consumer spending, according to Zenith.
The size of logistics industry in the country is about $90 billion to $125 billion, according to a study by Deloitte in India and the Indian Chamber of Commerce. Investments in logistics infrastructure may drive economic growth this decade, according to the study. Logistics accounts for 13 percent of the nation’s gross domestic product.
DHL Supply Chain said Oct. 16 that it will add 5 million square feet of warehousing space in eight cities including Mumbai, Bangalore and Chennai. The company also plans to upgrade its fleet of vehicles, it said in a statement.
Transporters have to contend with congested highways in India, where infrastructure is ranked worse than Guatemala’s by the World Economic Forum. Traffic snarls cost Asia’s third- biggest economy $5.5 billion annually, according to the Indian Institute of Management in Kolkata and Transport Corp. Trucks take 65 hours to travel the 1,374 kilometers (854 miles) between Mumbai and New Delhi because of traffic and stoppages at toll plazas and state borders.
Road construction is lagging behind an August 2009 target of 20 kilometers a day as slowing economic growth and high interest rates discourage builders from bidding for projects.
Prime Minister Singh’s government has targeted a spending of $1 trillion on roads, ports and railways in the five years through 2017. Authorities are also planning to award $2.3 billion of state-funded highway contracts this year.
“Whatever we’re doing is not enough,” Agarwal said. “Work on everything from roads, ports to railways is going very slowly.”
Not sure why SSN deductions are bracketed with TAX. SSN deductions are savings and will be paid back to you but TAX is a complete outgo.vera_k wrote:The marginal tax rates may be similar, but the effective tax rates are unfavorable towards India, because of the effect of various exemptions and deductions. This article that looks at how much room countries have to raise taxes to finance deficits, reports India has the second highest effective income tax, next only to Italy.
Effective tax rates
Pure BS, SSN deductions were deducted in the 4 and half months I worked in the USA. Now USA retirees are benefitting from my dedections, meanwhile I have to run pillar to post to PF transferred in the right account in India.subhamoy.das wrote:Not sure why SSN deductions are bracketed with TAX. SSN deductions are savings and will be paid back to you but TAX is a complete outgo.vera_k wrote:The marginal tax rates may be similar, but the effective tax rates are unfavorable towards India, because of the effect of various exemptions and deductions. This article that looks at how much room countries have to raise taxes to finance deficits, reports India has the second highest effective income tax, next only to Italy.
Effective tax rates
India continues to be a tough place for doing business even as the country has improved regulator processes for starting enterprises and trading across borders, according to World Bank and IFC.
In terms of ease of doing business, India is ranked 132nd among 185 countries. The nation's position for 2013 is unchanged from 2012.
Singapore is at the top position, followed by 'Hong Kong SAR, China' at second place and New Zealand at third spot.
Other nations in the top 10 are the US (4th), Denmark (5th), the UK (7th), Norway (6th), Korea (8th), Georgia (9th) and Australia (10th).
India is the lowest ranked among BRIC nations. Brazil (130th), Russia (112nd), China (91th) and 'Taiwan, China' (16th).
India is also below neighbouring Pakistan (107th) and Nepal (108th).