#139 A Question Of Sports

Yabi Lali

16 min

Knowledge

Description

Programming Note: We will be taking off next week. We will return on Aug 22. Not(PolicyWTF): Retrospective Admission Of A Mistake This section looks at egregious public policies. Policies that make you go: WTF, Did that really happen? - RSJ On Thursday, the Finance Minister tabled the Taxation Laws (Amendment) Bill, 2021 which sought to scrap the tax claims raised on the back of an amendment to the Income Tax Act brought about by the UPA-2 government in May 2012. The 2012 amendment was meant to prevent business entities incorporated in offshore locations but deriving most of their value from the Indian market to merge or acquire control in one another without paying capital gains taxes. This was seen as a loophole in the tax laws and the amendment was meant to plug it. All good with that. Except there was a small clause in there. The amendment was to be applied to past transactions too. The tax was to be retrospective in nature. Why Retrospective Taxes Are Bad We have written about the problem with <a href="https://publicpolicy.substack.com/p/73-thinking-about-retrospective-taxation">retrospective taxation in a previous edition</a>. We made three key points then. One, retrospective taxation is unfair and goes against what Adam Smith called the ‘canon of uncertainty’. I wrote earlier: The Canon of Certainty as set out by Smith states: “The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor and to every other person.” Retrospective taxation goes against this principle of fairness. It taxes a transaction that’s happened prior to law being framed. In the bigger picture, it is a human right violation since the state cannot remove a right without a transitional period. Two, there’s a legitimate reason to tax retrospectively. It is to avoid what’s called ‘forestalling’ – the

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#139 A Question Of Sports

Yabi Lali

16:30