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Solving the Haryana paradox |
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An inheritance tax law will spur philanthropy
Private universities hold promise
On Record
Profile
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An inheritance tax law will spur philanthropy THE recent visit of Warren Buffett and Bill Gates to India, and their meeting some of the rich Indians such as Azim Premji, has caused significant comment on and speculation about “giving” or, as it is also sometimes referred to as “charity” or even “philanthropy”. Many rationalisations and reasons have been put forth as to why do rich Indians give or not give, or give only to foreign institutions and not to institutions in India. Several of the analyses have dug deep to look for psychological and cultural reasons for the Indians’ or the Americans’ proclivity towards philanthropy or otherwise, and the outcomes of such research definitely have value. But as any medical diagnostician will know, going in for advanced pathological and radiological investigations before looking for simple clues based on an age-old clinical examination of the patient, may cost a lot of money and give the patient some psychological satisfaction but may not contribute much to treating the underlying disease. An obvious reason why we don’t like to give our wealth is that we prefer to leave it to our children. Doing the best one can for one’s progeny is a perfectly natural parental urge but the perception of what is “the best” varies depending on many factors. A contrived trade-off is: Do I prefer to leave my children maximum possible wealth in terms of money, property, business, etc., or do I prefer to give the children the best possible values, attitude, education, etc., so that they can earn their own wealth and be proud to have done it on their own? This is contrived because I could obviously try and do both, but one could also look at it as a system of preferences. This is where the laws of the land come in. Which of the two options above does the law encourage me to choose, and also discourages me to choose? The law, as it exists today in India, is neutral and, therefore, most parents try to do both, often not succeeding in either. Several so-called developed countries seem to have discouraged people from leaving enormous amounts of wealth to their progeny by the “inheritance tax”. This term raises the heckles of most people, raising the sceptre of what used to be called Estate Duty but in common parlance, referred to as “death duty”, implying a predatory state that did not want to leave even the dead alone, and tried to extract its pound of flesh from the dead. Estate duty was introduced in India with The Estate Duty Act, 1953, and was abolished on March 16,1985, under the Estate Duty (Amendment) Act, 1985. Inheritance Tax and Estate Duty are often used interchangeably all over the world, but there is a distinction based on “who pays”. Inheritance tax has to be paid by the inheritor and estate duty is charged on the estate of the dead person. Inheritance tax can even be considered to akin to gift tax, with the inheritance being considered as a gift from the dead person. Several countries actually do this. The United Kingdom did it till 1986, with the inheritor being required to pay Capital Transfer Tax under the Gift Tax rules. A separate Inheritance Tax law came into effect in 1986. Noted economist Adam Smith realised that inheritance in a capitalistic economy over time would result in extreme polarisation of wealth and opportunity, leading to social strife of the kind that is increasingly being seen in India over the last few years. He found inheritance justified only when dependent children had to be provided for. Describing The Wealth of Nations as “the best book extant” on political economy, Thomas Jefferson wondered about the same time whether all hereditary privileges should be abolished since “the earth belongs in usufruct to the living.” Smith, himself, had referred to this, saying, it is “the most absurd of all suppositions, (that) every successive generation of men have not an equal right to the earth.” Some enlightened societies have followed the inheritance route. A study of the rates of inheritance tax in some countries suggests that fixing varying levels of two variables, the rate of tax and the limit below which the tax does not apply can vary the impact of the inheritance tax. There are also variations from state to state in the US. An observer of the US situation said that while only a select number of citizens are affected by an inheritance tax, it is still a highly charged political issue. It is widely observed that while eliminating the tax may help the inheritors of many of the country's wealthiest citizens remain wealthy, the general population has little to fear from an inheritance tax law. Unfettered inheritance policies in a family-centric society acts like sweet poison bonding a free person into a “dynastic slave” and in time polarising wealth and opportunity to a pathological level. How else can we explain the widespread malaise of corruption in a society that essentially believes in karam, dharma, paap and punnya, all our morality religion and sensibilities are sacrificed at the altar of the ‘family’? It is noteworthy that countries that have ‘easy’ inheritance policies like Pakistan or even Brazil are characterised by pathological polarisation of wealth and opportunity, and routinely suffer financial scams as large as those in India. The ill-effects of following feudal inheritance policies were seen in Pakistan when the Swat Valley was over run by rebels. There were only 48 landlords in the Swat Valley — the politicians and other elite all belonged to these families. In India, the ill-effects of polarisation of wealth and opportunity can be seen in the fact that 13 of the 28 states are affected by Naxalite violence. Unfettered inheritance has brought even the well-intentioned land reforms preformed under Operation Barga in West Bengal and Kerala to naught. In one generation, landholdings in these states are back to the old times because wealth reforms did not follow land reforms. Inheritance policies are crucial to the long-term stability of society. The examples of Brazil, the Swat valley and our own Naxalite affected states are strengthened by the events in Egypt and Bahrain (no inheritance tax). Surprisingly this was clear to the capitalist thinkers and statesmen and they largely insulated their societies from the ill-effects of unfettered inheritance, where as we the socialists failed. One reason we hoard wealth is the complete lack of confidence in our society, which offers no social security. Rationalised inheritance policy will make available the resource for a truly effective social security programme that will remove the most tempting incentive to accumulate wealth — to provide for our succeeding generations. Putting in place an inheritance tax regime, will thus also contribute to removal of one of the adverse incentives for accumulating wealth, in addition to giving a fillip to philanthropy in the country. Such an attempt will not find favour with the rich and famous and may not be supported by most political parties because of their dependence on big money for elections. However, since the general population has little to fear from an inheritance tax law, the party that makes the first move to put this in place will reap the maximum benefit with the general population in the long run. But then, how many political parties care for the general population and the long run are difficult questions to answer.n Jagdeep S. Chhokar is a former Dean, Indian Institute of Management, Ahmedabad. Adess Singh is an innovator and author of the book, Unfettered Inheritance — The Root of The Rot |
Private universities hold promise India is set to become the youngest nation of the world and needs to provide higher education to 200 million students, as also train a 500-million workforce by 2022. The Knowledge Commission in 2007 envisaged the setting up of 1,500 universities countrywide by 2015. It is no secret that over the last two decades southern and western India has stolen the march on the rest of India in providing educational infrastructure. Also evident are the large gaps in education in Punjab, where, in the border belt, hundreds of thousands of youth are frustrated and becoming drug addicts, primarily due to lack of proper education and employment opportunities. A study lately has shown nearly 70 per cent drug abuse among youth aged 15 to 30 in the border belt of the state. While we are on the threshold of losing an entire productive generation, petty parochialism, partisan politics, disinformation and absolute lack of vision are stemming the building of higher education capacities. But the larger question is: Who is going to set up additional capacities? Going over the growth trends of colleges and universities in the country, the Indian Council for Research and International Economic Relations compiled a working paper in 2005, quoted in the National Knowledge Commission recommendations. It clearly indicated that while government universities are stagnant and aided colleges are tardy in growth, the drivers of capacity are unaided and private universities, which are the rapid growing and emerging centres of learning. Khalsa College, Amritsar, has stood the test of time as the torch-bearer for higher learning in Punjab since 1892. History is evidence to the fact that this institution provided assistance to three universities of Punjab during their hour of need. During partition Khalsa College provided space to Punjab Agricultural University for three years as this was perhaps the only centre of learning in the region with an agricultural wing. The botany and zoology classes of Panjab University were held on these august premises as well after partition. It is no secret that Guru Nanak Dev University owes its existence to space and support provided by Khalsa College. For two years the university was administered from the Agricultural College building of Khalsa College. Since time immemorial the Khalsa College Society has aspired to become a university by itself, and yet missed the opportunity each time. The Khalsa College Society has earned itself the right to set up a university to facilitate higher education among Punjabis, especially along the border belt. The strides made by the organisation lately are indeed the envy of many an organisation. In six years the Society raised nine new institutions entirely from its resources. It added colleges of education, engineering and technology, pharmacy, nursing, veterinary sciences, business studies, physical education apart from a rural college and a school. Its stature was further enhanced when selected to train the Super 50s, needy yet bright students for the administrative entrance examination. Out of about 18,000 colleges in the country, 333 colleges submitted their proposals for CPE Phase II. Only five colleges in Punjab, including Khalsa College, were awarded the UGC Potential For Excellence certification. Today, it holds a letter of intent to establish a Khalsa University, but the state government dithers due to adverse public opinion engineered successfully by a handful of teachers. Fuel to the fire has been added by political rivalry both within and outside the Akalis. How a positive endeavour in the interest of the community can be hijacked by vested interests is indeed a case in point. And to top that, adverse knee-jerk reactions of the community elders without taking recourse to facts are both intriguing and worrisome. This for sure does not augur well for a progressive community that yearns for channelling youth in directions other than addiction and shearing of the very principles of identity. The need of the hour is not brick and mortar education, but applied and innovative research and education, an industrial interface with milestone placement systems and international engagement to ensure opportunities for youth who could get into respectable jobs there rather than go the illegal route. There is no parallel institution which has the infrastructure, an agricultural set-up for renaissance agri-research, a stable charitable society to support and implement policy, and the vision and the experience to deliver. Are the people of Punjab and the global Punjabi community at large going to sit back and be swayed by uninformed hyperbole or listen to logic and reason for the sake of its languishing youth? One hopes and prays for progressive thought to prevail. The writer is a member of the Governing Council of Khalsa College, Amritsar. Email:
gunbirsingh@hotmail.com |
On Record
Diminutive and athletic, James Michael Lyngdoh is a man of few words. But when he speaks, his words are sharp and crisp and reflect brutal frankness. While in office, he had famously described politicians as cancers of society and corruption as a symptom of a greater disease. The string of scams rocking the nation now has only deepened his suspicion of the political class. Lyngdoh, a Ramon Magsaysay award winner, had presided over the Election Commission from June 2001 to February 2004. His tenure saw several brave and bold decisions that set the poll panel on a collision course with political bigwigs. After retirement, this
upright IAS officer has chosen to settle down in a desolate place far from the madding crowd, about 50 km from Hyderabad. Excerpts from an interview:
Q: Long after retirement, you are still very passionate about fighting corruption. How do you eel when scams make headlines very day?
A: The people have lost faith in the State. This is a dangeroustrend. Corruption is only a symptom of a larger disease afflicting India. No aspect of our society is free from corruption.
Q: What do you attribute this growing corruption to?
A: Capitalism and unbridled pr vatisation. The world is now ruled by Fortune 500 people. It is the orporate sector which is controlling politics now. They dictate policies. They are getting into politics. They are far more dangerous than criminals and musclemen. I had predicted long back that the Ambani brothers will rule the country one day. There is a distinct possibility of that happening.
Q: Do you think that greater tate control will solve the problem? Are State-run institutions free from corruption? Can we ignore the benefits of liberalisation and privatisation in terms of creation of wealth and promotion of entrepreneurial skills?
A: No. Our system has failed to deliver. Ours is a capitalism gone wild. We have opened floodgates to private investment and exploit tion in virtually every sector. So much so that the primary function of the governments now seems to be to protect the interests of the private sector. Corruption is just one facet of unbridled capitalism. It has destroyed a lot of instit tions. The capitalism-driven world gives an illusion of secur ty, euphemistically called the market system.
Q: Why do you think India has gained such notoriety in institutionalising corruption?
A: In India corruption is growing rapidly because there is no fear of the law among the perpetrators. Temptations are too strong and opportunities are plenty. Why should anybody be honest? There is no incentive for being honest. In America, there is at least a guarantee that the culprit will go to jail. Here, there is no such thing.
Q: What is the solution then? Will steps like the Lokpal Bill help?
A: I may sound harsh but there seems to be no solution now. A
Q: You were a party to a PIL challenging the appointment of PJ Thomas as the CVC. But you had praised him on the persoal front. How do you reconcile to this contradiction?
A: Thomas had worked with me. He is a very decent person and a man of integrity. He should not have allowed himself to be appointed to the post under those circumstances. He may have fallen into a trap of politicians. He was a victim of circumstances. I am not prepared to believe that he had taken money in any
transaction. It is not about questioning the integrity of Thomas but in public perception it assumes maximum importance. It is unfair to describe him as a tainted person. The media has been unfair to him by projecting him as a tainted person and questioning his integrity and being judgmental. It was a serious mistake on the part of the Prime Minister and the Home Minister to have chosen him for the post despite a charge sheet being filed against the officer in Kerala. Unwittingly, Thomas has done a great public service to the country by going through the whole process instead of quitting in the initial stages of the ordeal. His case has exposed faults in high places.
Q: Do you think an independent committee should oversee key appointments? A: It will not serve any great purpose. It is not the fault of the Otherwise, it will encourage a lot of jockeying and lobbying, the kind you see for civilian honours, which will result in worse situations.
Q: You have made several suggestions to make elections from corruption free. Which of the proposed electoral reforms, in your view, is
the most important one?
A: The idea of proportional representation. It will ensure representation to important groups and factions and benefit a
pluralist society such as ours. |
Profile Life has not always been easy going for H M Naqvi, the winner of the DSC Prize for South Asian Literature of 2011. He was a destitute while writing his award-winning novel “Home Boy”, which fetched him $50,000. He used to work during the day and write at night. He was in overdraft every month, and started cooking his own food and stopped socialising. He has been quoted as saying: “I stopped eating out, drinking; even started cutting my hair to save money”. He lived in a rented room above Harvard Bookstore in Massachusetts. The story of “Home Boy” somewhat resembles the events in Naqvi’s life. “Home Boy” features a young man, Shahzad, who was in finance when picked up by the FBI for possible terrorist links. Shahzad, like Faisal Shahzad, an Indian terrorist, had a tough time in the US. He was fired from his job. He took to cab driving but found himself unable to face the reality of the situation but, unlike “my character” (Pakistani Shahzad), he mulled terrorism as an option when he was having a tough time, said Naqvi in a TV interview. “Home Boy”, a tragic-comic narrative, was born out of the developments that followed the 9/11 attacks. The novel, Naqvi says, is “14 per cent” autobiographical. Naqvi, who lost a close friend in the attacks, was at the World Trade Towers at the time of the attack and saw buildings collapse “before my eyes”. The backdrop of 9/11 gave his novel its contemporary touch. Poetry, perhaps, is Naqvi’s first love. He wrote his first poem when he was six. When destitution stared him at his face, he realised he needed to work. He walked into the World Bank in the US with his resume and got himself a job in 1997. His plan was to make some money and retire to write a novel. After seven years there, he quit his job in 2003 to start work on his novel. He exhausted all his savings in eight months but he got a scholarship for a master degree in creative writing from Boston University, where he also taught a couple of semesters. While he was working on the book between 2003 and 2007, he made just about $11,000. “Thereby began my second period of destitution”, he says. Naqvi was born in 1974 and spent his childhood in Karachi, Islamabad, Algiers and New York. The eldest of three brothers, he spoke Urdu and English at home. After graduating from Georgetown University in 1996 with a degree in economics and English literature, he wrote short stories while subsisting on a “two-dollar budget”. He also ran the only slam poetry venue in Washington D.C., the Fifteen Minute Club. He also represented the National Poetry slam in Anna Arbor, Michigan in 1995. His poems were broadcast over the BBC. His debut novel, “Home Boy” was first published in September, 2009, by the Grove Books division of Random House to acclaim. The New York Times hailed it as a “smart.. debut (that) is at once immigration narrative”. “Home Boy” is considered a remarkably engaging novel that delights as it disturbs. When “Home Boy” was published in India in January, 2010 by Haper Colins, it hit the top ten fiction bestseller lists. According to the Indian Express, the novel is culturally well up to the facts or situation. In January 2010 Naqvi attended the Jaipur Literature Festival. “Home Boy” has been very well received in Pakistan. The German, Italian and Portuguese editions were published in 2010. |
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