Editorial Simplified : 12th May

Editorial Simplified : 12th day of May 2016

This Series of posts covers the essential Editorial from prominent newspapers. The Editorial from the newspapers are compiled by the Subject Teachers form the Academy and provided in notes format so that the aspirants does not waste their precious time in sifting through the newspapers. 

The aspirants are advised to bookmark this page for future reference 

Click on the tab below to read the Editorial Simplified for each newspaper

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Editorial : No small change

Context

Indian Govt has amended a tax treaty with Mauritius in which equity routed through Mauritius used to escape short term as well as long term capital gains tax in India due to Double Taxation Avoidance Agreement (DTAA) between India and Mauritius

Level playing field

  • Foreign investors and Indian investors which route their investments through Mauritius as well as Singapore (due to clause linking Mauritius DTAA with Singapore DTAA) are now at par with domestic investors
  • These two locations account for nearly two thirds of all investments in India (using Participatory Notes mode)
  • It is expected that now Foreign Portfolio Investments will improve in quality as now investment will reflect strength in macroeconomic fundamentals

Time to adjust

  • Existing investors as well as who acquire shares before April 1, 2017 will not be taxed.
  • Further, firms in Mauritius and Singapore will be taxed at concessional rate for the first two years until March 31, 2019.

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Editorial : Lessons from Uttarakhand

Context
The Uttarakhand Government was recently dismissed by the Central Government and then the Supreme Court re-instated the government via floor test. The editorial examines the situation and the lessons to be learnt from it.

Important points

  • The Chief Minister of Uttarakhand was destined to win the floor test after the Supreme court had barred the 9 dissident Congress legislators from participating in the floor test.
  • Two legal principles relevant to the situation are: 
    • The bar in defection
    • The primacy of floor test in determining a government’s majority.
  • The right of legislators to disagree is limited by rule against defection by law presently.
  • The case of Uttarakhand was complicated by the fact that a clear majority in the Assembly made up by the Bhartiya Janta party and Rebel Congress Legislators had pressed for division of votes in writing.
  • The legal challenge in Supreme is not over yet as the Court still has to decide whether disqualification of Congress legislators was valid or not.

Questions at larger level

  • The Uttarakhand crisis raises important questions relevant to functioning of democracy.
  • The most important question being ‘ Is it appropriate to take recourse to anti-defection law to stay in power?’
  • Another significant question is ‘Whether a few legislators be allowed to topple the Government at the behest of the opposition.’

Analysis

  • The editor feels that the floor test as advised in the landmark case of Bommai by the Supreme Court has provided good protection for States against misuse of power by the Centre.
  • But the growing misuse of anti-defection law needs to be checked.

Editorial : Closing the tax bolthole

Context

Mauritius and India have recently renegotiated the terms of Double Tax avoidance agreement which was due for many years and had led to huge revenue losses. The editorial studies the development.

Important points

  • For many years Mauritius was serving as the heaven for businesses setting up bogus companies to save taxes.
  • The latest amendment promises to plug the loopholes and stop tax avoidance.
  • The new provisions include a mandatory check of the main purpose and bonafides of the company. If the total operational expenses of the company in that country are less than 27 lakh it will be considerd a shell company and will not be eligible for 50 percent reduction in tax rate on capital gains.
  • Another provision includes that fromApril 1, 2019 all transactions attracting capital gains tax for investments made out of Mauritius will be taxed at the full applicable rate at the time in India.

Positives of the agreement

  • The Double Tax Avoidance Agreement will ensure India’s conformity to the Organization For Economic Cooperation and Development and G-20 guidelines for combating base erosion and profit shifting.
  • The Double Tax Avoidance Agreement  will also ensure a level playing field for all international investors in India irrespective of their domicile. This will enhance India’s attractiveness as an investment destination in the long run.

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