India and the 10-country South East Asian bloc Asean have signed a free trade agreement after more than six years of talks.
Tariffs on electronics, chemicals, machinery and textiles will be reduced and eventually eliminated.
These products make up 80% of goods traded between India and Asean.
But India has been allowed to continue protecting its farm sector, and has excluded 489 products, including rubber, from the trade deal.
Computer software and information technology are also exempt.
A smaller list of products, described as "highly sensitive", such as palm oil and coffee, will see tariffs reduced over about 10 years, but only modestly.
'Win-win'
The deal was signed in Bangkok at a meeting of economic ministers of the Association of South East Asian Nations - made up of Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Asean is India's fourth-largest trading partner. The value of trade between the two was $47bn (£28bn) in 2008.
Secretary-general of the Federation of Indian Chambers of Commerce and Industry, Amit Mitra, said the agreement, which comes into effect form January next year, was "a win-win for both sides".
"Our minds have met. Of course, a few will lose, but many more will gain."
Thursday, August 13, 2009
Stephen Hawking awarded Presidential Medal of Freedom by Barack Obama
Stephen Hawking, the physicist and Cambridge professor, has been awarded the Presidential Medal of Freedom, America's highest civilian honour by Barack Obama.
President Obama joked that he would not try to attempt to explain the British scientist's work as he bestowed the medal on him.
Prof Hawking, who is completely paralysed by motor neurone disease, joined recipients including Billie Jean King, the former tennis player, Archbishop Desmond Tutu, Sidney Poitier, the actor, and Mary Robinson, the former Irish president and United Nations Human Rights Commissioner, at the ceremony in the White House for "extraordinary agents of change".
Others being honoured included Senator Edward Kennedy, who has been battling brain cancer and was not present, Sandra Day O'Connor, a former Supreme Court Justice, and Muhammad Yunus, a Nobel Peace Prize laureate who pioneered ''micro loans'' to provide credit to poor people.
At one point during the ceremony, Mr Obama had to dodge the feathers of the head dress worn by Joe Medicine Crow, a native American writer and leader.
Mr Obama, awarding his first presidential medals, also gave a posthumous award to Harvey Milk, the American gay rights activist and politician, who was assassinated in 1978.
Reflecting on those receiving the honour, President Obama said: ''In a moment when cynicism and doubt too often prevail, when our obligations to each other are too often forgotten and when the road ahead can seem too long or hard to tread, these extraordinary men and women, these agents of change remind us that excellence is not beyond our abilities, that hope lies around the corner and that justice can still be won in the forgotten corners of the world.
''They remind us that we each have it within our powers to fulfil dreams, to advance the dreams of others and remake the world for our children.''
Describing Prof Hawking, 67, who gained public fame with his book A Brief History of Time, the president said: ''From his wheelchair, he has led us on a journey to the farthest and strangest reaches of the cosmos. In so doing, he has stirred our imagination and showed us the power of the human spirit.''
The Medal of Freedom was established by President Harry Truman in 1945 to recognise civilians for their efforts during the Second World War. President John F Kennedy reinstated the medal in 1963 to honour distinguished service.
Government mulls raising retirement age to 62 yrs
Move aimed at easing strain on finances in a drought year.
The government is actively considering raising the retirement age of all central government employees, including those in the armed forces, from the present 60 to 62 years.
Finance Minister Pranab Mukherjee has submitted a report to the prime minister outlining all the pros and cons of the move, including the “cascading effects” on government employment and the huge savings, at least for two years, on account of retirement payouts.
If the Department of Personnel and Training (DoPT) and the prime minister find the arguments forwarded by the finance ministry credible and convincing, the announcement may come as early as August 15, as part of Manmohan Singh’s Independence Day speech.
The Cabinet may discuss the matter tomorrow.
Although the finance ministry is making a strong case for the move, the DoPT is taking time to make up its mind, possibly out of consideration for the 1979 batch of the Indian Administrative Service (IAS) and other central services. Officers of the 1979 batch have been empanelled for promotion to the ranks of additional secretary and secretary but can take up their posts only after the present incumbents retire. If an announcement extending the retirement age comes before November, a batch of empanelled joint secretaries stand to lose their future ranks. In turn, this will also affect those who joined the central administrative services in 1980. The DoPT also says that the age profile of Indian bureaucrats, instead of becoming younger, will become older, out of tune with the rest of the world.
For the finance ministry, the gains from the move are clear. The pension payout of all armed forces personnel of the rank of Lieutenant General and equivalent who were to retire this year will be postponed by 24 months; the government will also defer by two years the liability of paying pension to more than 100,000 employees. While salaries will have to continue to be paid, this will be cheaper than paying upfront benefits like gratuity.
This is all the more important given the government’s other financial liabilities on account of stimulus spending and one drought, though the effects of the latter will kick in only in the next fiscal year. The fiscal deficit is 6.8 per cent of gross domestic product this year and a two-year lag in paying pensions will help in bridging this.
In 1998, the National Democratic Alliance government had raised the retirement age from 58 to 60, a move that benefitted 90,000 government servants and 50,000 defence personnel. At the time, the logic was: the retirement of 140,000 employees would have cost Rs 5,200 crore whereas paying salaries cost only Rs 1,493 crore.
That move came in the wake of the 5th Pay Commission report which had just been implemented by the then United Front government. In 2003, the government also right-sized the central government employee workforce by 30 per cent.
Every time the Centre announces an increase or concession on pay packages, both public-sector units and state governments follow suit. If the prime minister does decide to raise the retirement age, state governments and Public Sector Units (PSUs) will mirror this action. This has its own implications for many cash-strapped states like Punjab.
If the decision is finally taken, it will only be the third time the government will have raised the retirement age. Jawaharlal Nehru was the first prime minister to have increased the age of superannuation from 55 to 58 following the 1962 war with China. The Atal Bihari Vajpayee government did it a second time in 1998.
The government is actively considering raising the retirement age of all central government employees, including those in the armed forces, from the present 60 to 62 years.
Finance Minister Pranab Mukherjee has submitted a report to the prime minister outlining all the pros and cons of the move, including the “cascading effects” on government employment and the huge savings, at least for two years, on account of retirement payouts.
If the Department of Personnel and Training (DoPT) and the prime minister find the arguments forwarded by the finance ministry credible and convincing, the announcement may come as early as August 15, as part of Manmohan Singh’s Independence Day speech.
The Cabinet may discuss the matter tomorrow.
Although the finance ministry is making a strong case for the move, the DoPT is taking time to make up its mind, possibly out of consideration for the 1979 batch of the Indian Administrative Service (IAS) and other central services. Officers of the 1979 batch have been empanelled for promotion to the ranks of additional secretary and secretary but can take up their posts only after the present incumbents retire. If an announcement extending the retirement age comes before November, a batch of empanelled joint secretaries stand to lose their future ranks. In turn, this will also affect those who joined the central administrative services in 1980. The DoPT also says that the age profile of Indian bureaucrats, instead of becoming younger, will become older, out of tune with the rest of the world.
For the finance ministry, the gains from the move are clear. The pension payout of all armed forces personnel of the rank of Lieutenant General and equivalent who were to retire this year will be postponed by 24 months; the government will also defer by two years the liability of paying pension to more than 100,000 employees. While salaries will have to continue to be paid, this will be cheaper than paying upfront benefits like gratuity.
This is all the more important given the government’s other financial liabilities on account of stimulus spending and one drought, though the effects of the latter will kick in only in the next fiscal year. The fiscal deficit is 6.8 per cent of gross domestic product this year and a two-year lag in paying pensions will help in bridging this.
In 1998, the National Democratic Alliance government had raised the retirement age from 58 to 60, a move that benefitted 90,000 government servants and 50,000 defence personnel. At the time, the logic was: the retirement of 140,000 employees would have cost Rs 5,200 crore whereas paying salaries cost only Rs 1,493 crore.
That move came in the wake of the 5th Pay Commission report which had just been implemented by the then United Front government. In 2003, the government also right-sized the central government employee workforce by 30 per cent.
Every time the Centre announces an increase or concession on pay packages, both public-sector units and state governments follow suit. If the prime minister does decide to raise the retirement age, state governments and Public Sector Units (PSUs) will mirror this action. This has its own implications for many cash-strapped states like Punjab.
If the decision is finally taken, it will only be the third time the government will have raised the retirement age. Jawaharlal Nehru was the first prime minister to have increased the age of superannuation from 55 to 58 following the 1962 war with China. The Atal Bihari Vajpayee government did it a second time in 1998.
Govt proposes radical changes in direct taxes
The government today initiated radical tax reforms through a draft code that aims to reduce the tax burden and streamline the over four-decade-old Income Tax Act.
Releasing the code today, Finance Minister Pranab Mukherjee said if reasonable level of discussion takes place on the code, a Bill could be placed in the winter session of Parliament.
For individuals, the code proposes to treble the tax deduction on savings to Rs 3 lakh. In addition, the tax slabs have been reworked in a way that 10 per cent tax would be levied on income up to Rs 10 lakh as against an income of Rs 1.6 lakh to Rs 3 lakh at present. The highest tax rate of 30 per cent will be paid by those earning over Rs 25 lakh as against Rs 5 lakh now.
The corporation tax rate is proposed to be lowered to 25 per cent from 30 per cent now, a move that would bring India’s tax rate in line with that of China.
However, companies paying minimum alternate tax (MAT) would see a higher burden as the government intends to calculate the tax on the basis of the gross value of assets at the end of the financial year against the present system of the levy being linked to book profits. For non-banking companies, MAT will be 2 per cent of the gross value of assets.
Mukesh Butani, partner, BMR Advisors, said, “If you look at countries that levy MAT as a percentage of the value of gross assets, the rate is anywhere between 0.5 and 0.75 per cent. Two per cent is a very high rate. So, if you look at a company that is capital-intensive, it’s making investments, it’s building assets — 2 per cent is a very regressive rate of tax.”
In the biggest change to tax laws since 1961, Finance Minister Pranab Mukherjee also proposed to abolish the Securities Transaction Tax. However, investors will have to pay a capital gains tax on profits earned by them on investments irrespective of the tenure of investments. In other words, there is no distinction between short-term and long-term, though the gains realised after one year will be eligible for indexation benefits. “The rate of capital gains tax at 30 per cent is rather high,” Uday Ved, head, taxation, KPMG, said.
It also proposes rationalisation of tax provisions for amalgamations and demergers so that tax remains neutral when businesses reorganise. Also, the draft code proposes to allow business losses to be carried forward indefinitely as against the present ceiling of eight years. This will allow companies to set off the losses against future business profits and help reduce the tax burden.
The other bad news is the proposed withdrawal of exemptions for individuals as well as companies. While a handful of companies in sectors such as infrastructure, oil and gas exploration and production and special economic zones would be eligible for tax breaks, the formula has also been changed to investment-linked incentives instead of the practice of profit-linked sops used at present.
Under the new regime, companies would be eligible to recover all capital and revenue expenditure, barring those related to land, goodwill and financial instruments, before its profits are subjected to tax. “The period consumed in recovering all capital and revenue expenditure will be the period tax holiday,” the 254-page document released for public comment today said.
The other tax benefits, including the area-specific ones, will be allowed to lapse.
In case of individuals, the code seeks to bring provident fund and life insurance accumulation under the tax net at the time of withdrawal. In a big setback to home buyers, the interest component on home loans for self-occupied properties can no longer be used to claim tax deductions. The underlying principle is that a self-occupied property does not generate any income for a tax payer.
Tax experts said that a lower tax burden was expected to rein in widespread tax evasion that leaves the government reliant on only 27 million people who pay taxes out of a population of 1.2 billion. The carrot however comes with a stick, too. The government proposes to term those who do not file returns on time as wilful defaulters. Those under-reporting incomes now face higher penalties and stepped-up prosecution procedures.
The code also suggests introduction of a general anti-avoidance rule to combat tax avoidance to check instances of round-tripping, dividend-stripping and accommodating “party transactions”. Nishith Desai, Founder, Nishith Desai Associates, said this was a “draconian provision which contradicted the settled positions of tax jurisprudence established over more than half a century ago. Under the present law, the tax treaties override the Income Tax Act, if more beneficial. Now it is proposed that changes in the Tax Code can override the treaty. This means the benefits of the treaties can be totally negated. Even the constitutionality of many of these provisions could be challenged. At this juncture when the Indian tax regime is perceived highly adversarial, a question arises whether we really need to add more complications”.
Releasing the code, the finance minister said “the thrust of the code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base”.
Home Minister P Chidambaram, who initiated work on the code during his tenure as finance minister, said the attempt was to simplify the language to enable better comprehension and remove ambiguity to foster voluntary compliance.
Chidambaram added that the present IT Act had virtually become a happy hunting ground for lawyers. The code would probably become law by 2011, which will be the golden jubilee of the Income Tax Act.
In his Budget speech on July 6, Mukherjee had promised to bring the draft code within 45 days for the public comment. However, the code was released over a week ahead of schedule.
Tax evaders may face prison terms up to seven years and fines to ensure compliance.
Releasing the code today, Finance Minister Pranab Mukherjee said if reasonable level of discussion takes place on the code, a Bill could be placed in the winter session of Parliament.
For individuals, the code proposes to treble the tax deduction on savings to Rs 3 lakh. In addition, the tax slabs have been reworked in a way that 10 per cent tax would be levied on income up to Rs 10 lakh as against an income of Rs 1.6 lakh to Rs 3 lakh at present. The highest tax rate of 30 per cent will be paid by those earning over Rs 25 lakh as against Rs 5 lakh now.
The corporation tax rate is proposed to be lowered to 25 per cent from 30 per cent now, a move that would bring India’s tax rate in line with that of China.
However, companies paying minimum alternate tax (MAT) would see a higher burden as the government intends to calculate the tax on the basis of the gross value of assets at the end of the financial year against the present system of the levy being linked to book profits. For non-banking companies, MAT will be 2 per cent of the gross value of assets.
Mukesh Butani, partner, BMR Advisors, said, “If you look at countries that levy MAT as a percentage of the value of gross assets, the rate is anywhere between 0.5 and 0.75 per cent. Two per cent is a very high rate. So, if you look at a company that is capital-intensive, it’s making investments, it’s building assets — 2 per cent is a very regressive rate of tax.”
In the biggest change to tax laws since 1961, Finance Minister Pranab Mukherjee also proposed to abolish the Securities Transaction Tax. However, investors will have to pay a capital gains tax on profits earned by them on investments irrespective of the tenure of investments. In other words, there is no distinction between short-term and long-term, though the gains realised after one year will be eligible for indexation benefits. “The rate of capital gains tax at 30 per cent is rather high,” Uday Ved, head, taxation, KPMG, said.
It also proposes rationalisation of tax provisions for amalgamations and demergers so that tax remains neutral when businesses reorganise. Also, the draft code proposes to allow business losses to be carried forward indefinitely as against the present ceiling of eight years. This will allow companies to set off the losses against future business profits and help reduce the tax burden.
The other bad news is the proposed withdrawal of exemptions for individuals as well as companies. While a handful of companies in sectors such as infrastructure, oil and gas exploration and production and special economic zones would be eligible for tax breaks, the formula has also been changed to investment-linked incentives instead of the practice of profit-linked sops used at present.
Under the new regime, companies would be eligible to recover all capital and revenue expenditure, barring those related to land, goodwill and financial instruments, before its profits are subjected to tax. “The period consumed in recovering all capital and revenue expenditure will be the period tax holiday,” the 254-page document released for public comment today said.
The other tax benefits, including the area-specific ones, will be allowed to lapse.
In case of individuals, the code seeks to bring provident fund and life insurance accumulation under the tax net at the time of withdrawal. In a big setback to home buyers, the interest component on home loans for self-occupied properties can no longer be used to claim tax deductions. The underlying principle is that a self-occupied property does not generate any income for a tax payer.
Tax experts said that a lower tax burden was expected to rein in widespread tax evasion that leaves the government reliant on only 27 million people who pay taxes out of a population of 1.2 billion. The carrot however comes with a stick, too. The government proposes to term those who do not file returns on time as wilful defaulters. Those under-reporting incomes now face higher penalties and stepped-up prosecution procedures.
The code also suggests introduction of a general anti-avoidance rule to combat tax avoidance to check instances of round-tripping, dividend-stripping and accommodating “party transactions”. Nishith Desai, Founder, Nishith Desai Associates, said this was a “draconian provision which contradicted the settled positions of tax jurisprudence established over more than half a century ago. Under the present law, the tax treaties override the Income Tax Act, if more beneficial. Now it is proposed that changes in the Tax Code can override the treaty. This means the benefits of the treaties can be totally negated. Even the constitutionality of many of these provisions could be challenged. At this juncture when the Indian tax regime is perceived highly adversarial, a question arises whether we really need to add more complications”.
Releasing the code, the finance minister said “the thrust of the code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base”.
Home Minister P Chidambaram, who initiated work on the code during his tenure as finance minister, said the attempt was to simplify the language to enable better comprehension and remove ambiguity to foster voluntary compliance.
Chidambaram added that the present IT Act had virtually become a happy hunting ground for lawyers. The code would probably become law by 2011, which will be the golden jubilee of the Income Tax Act.
In his Budget speech on July 6, Mukherjee had promised to bring the draft code within 45 days for the public comment. However, the code was released over a week ahead of schedule.
Tax evaders may face prison terms up to seven years and fines to ensure compliance.
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