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List of Contents
- Road towards a Global Minimum Corporate Tax
- India needs to strengthen the rural health infrastructure
- Improper Comments on Bangladesh will impact India Bangladesh ties
- Significance of the Kedar Nath Singh Judgment on Sedition
- Reason behind the decision to shift the National Museum
- The tussle of Digital Services Tax between India and US
Road towards a Global Minimum Corporate Tax
Source: The Hindu
Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources
The US has proposed a 15% Global Minimum Corporate Tax that will prevent tax avoidance by companies. The tax would be beneficial for India. But many counties will not accept the tax structure.
The Base Erosion and Profit Shifting (BEPS) programme were initiated in 2013. It aims to curb practices that allowed companies to reduce their tax liabilities by exploiting loopholes in the tax law. But to tax Big tech companies the countries have to sign a BEPS agreement among themselves.
So the OECD also asked the countries in the BEPS framework to adopt a consensus-based outcome instead of the country’s individual moves.
Challenges to the BEPS framework:
- Over the past decades, there are many countries that enacted tax policies specifically aimed at attracting multinational business. These countries attract investment by lowering corporate tax rates. This, in turn, has pushed other countries to lower their rates as well to remain competitive.
- Also, there are few Developing countries as well that are not sure if they will receive the right to tax the mobile incomes of Big tech companies
The OECD policy note:
- Addressing these concerns, On 12 October 2020, the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) released ‘blueprints’ on Pillar One and Pillar Two.
- It aims to reach a multilateral consensus-based solution to the tax challenges due to the digitalization of the world economy.
- Pillar 1: It addresses the issue of reallocation of taxing rights to all the countries
- Pillar 2: This pillar aims to address all the remaining issues in the BEPS program.
- The US has recently put forward a proposal to impose a 15% Global Minimum Corporate Tax on companies in consonance with Pillar two.
What is Global Minimum Corporate Tax?
- It is a type of corporate tax. Under this, If a company moves some of its operations to another country having low-tax jurisdiction, then the company have to pay the difference between that minimum rate and whatever the firm paid on its overseas earnings.
- For example, assume Country A has a corporate tax rate of 20 percent and Country B has a corporate tax rate of 11 percent. If the global minimum tax rate is 15 percent. Consider a situation, where Company X is headquartered in Country A, but it reports income in Country B. Then Country A will increase the taxes paid by Company X. This is equal to the percentage-point difference between Country B’s rate and the global minimum rate(15 percent).
In short, Company X will have to pay an additional 4 percent of the tax to Country A.
The rationale behind the 15% Global Minimum Corporate Tax proposal:
- The US aims to minimize tax incentives and force companies to choose a place in a particular country based on commercial benefits.
- For example, It is intended to discourage American companies from inverting their structures and operate outside the US, due to the increase in the U.S. corporate tax rate.
- The proposal, if passed, will give other countries the right to “tax back”. For example, countries can tax,
- Other jurisdictions have either not exercised their primary taxing right or
- Have exercised it at low levels of effective taxation.
Challenges surrounding the proposal:
- First, the OECD was considering a 10-12% Global rate. A high rate of 15% may not be accepted by smaller countries like Ireland. Ireland charges a marginal rate of 12.5 %. They argue that a Global minimum tax would impair fiscal autonomy for smaller jurisdictions to compete with larger economies.
- Second, the US had earlier proposed a rate of 21% that would have generated greater revenues. However, a proposal of a 15% rate may not be passed by the US congress.
India and the Global Minimum Corporate Tax rate:
- India did not object to the proposal as the same would generate additional revenue for the country.
- The State of Tax Justice report of 2020 states that India loses over $10 billion in tax revenue due to the use of offshore structures. The popular locations include Mauritius, Singapore, and the Netherlands where there is an almost negligible rate of taxation.
- If passed, the Indian government can impose a tax on offshore subsidiary units of Indian companies. The taxation can be to such a level that it enables the imposition of an effective Global Minimum Tax on every company.
- The acceptance of a Global Minimum Corporate Tax would induce the countries to compete on other factors like better regulatory regimes, ease of doing business, access to global talent, etc.
- However, if consensus is not built on a 15% rate, then the US can apply its domestic law version of Pillar Two at a rate of 21%.
- Nonetheless, the countries should focus on encouraging trade and economic activity in the post-pandemic era rather than debating over disagreements on tax allocations.
India needs to strengthen the rural health infrastructure
Source: The Hindu
Gs2: Issues Relating to Development and Management of Social Sector/Services relating to Health
Synopsis: Rural health infrastructure (SHCs, PHCs and CHCs) needs to be Modernised to cater to the health needs of the 65% of the population living in rural areas
- According to info, out of 139 crore population of India, at least 91 crore people are living in 649,481 villages.
- The second wave of Covid-19 had impacted the rural community the most.
- Further, there is a growing incidence of non-communicable diseases (NCDs) such as hypertension, diabetes, cancer and cardiovascular diseases in rural India. As per WHO, NCDs cause nearly about 5.87 million (60%) of all deaths in India.
- Accordingly, there is a need to focus on strengthening the existing rural health infrastructure.
- Prioritising the development of the rural health network (SHCs, PHCs and CHCs) will help in the effective delivery of Health services to rural people.
Inadequate and poor health infrastructure in the rural areas
According to the fact shared by the Union Minister of State for Health and Family Welfare in the Rajya Sabha. India is having inadequate PHCs, CHCs, specialists, etc.
- Inadequate primary health centres (PHCs): India has only 25,743 primary health centres (PHCs) though the estimated requirement of PHC’s in rural India is 29,337. (Shortfall of 3,594 units).
- Inadequate community health centres (CHCs): Against the requirement of 7,322 CHC’s, rural India has only 5,624 community health centres (CHCs).
- Inadequate specialists in CHC’s: Data on CHCs, show that, overall, there is a shortfall of 81.8% specialists as compared to the requirement for existing CHCs.
- Inadequate infrastructure: According to the Human Development Report 2020, India has eight hospital beds for a population of 10,000 people, while China has 40 beds for the same number of people.
Significance of rural health infrastructure in effective delivery of health Services
- Rural health networks will help to treat the diseases at the primary level. Further, it will also help us save a lot of money and the resources being spent at tertiary level health care.
- For instance, if our Sub-HCs work effectively, there will be less pressure on PHCs. If the PHCs function well, then there will be minimal pressure on CHCs and so on.
- It will enable people’s participation in ensuring better functioning of rural health services.
- For example, in case of Haryana, Swasthya Kalyan Samitis, or SKSs were constituted for all CHCs, PHCs.
- It helped health providers to engage with all kinds of rural community organisations (panchayats, gram Sabha, notified area committees, municipal bodies and non-governmental organisations) in minimising the adverse impact of the pandemic on rural life.
Suggestions to improve rural health infrastructure:
- Rural health networks should have access to the health data of people in their respective areas. It will enable them to identify those likely to slip into the secondary or tertiary care zone.
- Need to conduct Regular health camps. It will help us to identify those on the verge of developing tuberculosis, hypertension, diabetes or any diseases owing to their socio and economic conditions.
- A CHC or referral centre should be modernized with effective and adequate health infrastructure. For example, A single CHC should have least 30 beds for indoor patients, operation theatre, labour room, X-ray machine, pathological laboratory, standby generators’ etc.,
WHO states that ensuring accessibility, affordability and Quality are Key to achieve Universal Health Coverage. The government should strive to provide regular and comprehensive healthcare needs in rural areas guided by the World Health Organization (WHO)’s principle of Universal Health Coverage.
Improper Comments on Bangladesh will impact India Bangladesh ties
Source: The Hindu
Gs2: India and its Neighborhood- Relations.
Synopsis: India Bangladesh ties are highly sensitive and based on Mutual trust and respect. Disregarding any nation by words or action by Indian leaders will be detrimental to the consolidation of bilateral ties.
- Recently, the Indian Home minister made derogatory statements with reference to Bangladesh.
- The home minister described illegal Bangladeshi immigrants as vermin. He even mentioned that he would push them into the Bay of Bengal.
- Such actions of political figures in India will have potential ramification in consolidating bilateral ties with Bangladesh
Issues and Challenges in India-Bangladesh ties
- There are inevitable bilateral problems between India and Bangladesh of long duration. For example,
- A perennially favourable balance of trade for India
- Drought and flood in the 54 transboundary rivers flowing from India to Bangladesh
- The smuggling of goods and vulnerable human beings across the approximately 4,100-kilometre land border.
- Presence of militant Islamist groups such as Harkat-ul-Jihad-al-Islami, that have linkages and support from outside Bangladesh.
Significance of Bangladesh to India
- The Bangladeshi government under Sheikh Hasina has been so supportive to India. For instance,
- She has maintained vigilant supervision over Muslim fundamentalist terrorists as well as on Northeast militant movements sheltering in Bangladesh.
- She has improved connectivity between India and its Northeast by land, river and the use of Bangladeshi ports.
- Indian investments in Bangladesh have been encouraged. Moreover, around 100,000 Indian nationals now live and work in Bangladesh.
Suggestions to improve India Bangladesh ties:
- First, India should view the developments in Bangladesh with gratification. For example,
- Bangladesh will shift from ‘least developed’ to ‘developing country’ status by 2026.
- Bangladesh has made steady progress in human development indicators
- Second, responsible individuals from both countries must be actively discouraged from words and actions detrimental to the consolidation of the existing friendship.
Significance of the Kedar Nath Singh Judgment on Sedition
Source: The Indian Express
Syllabus: GS 2 – Indian Constitution—historical underpinnings, evolution, features, amendments, significant provisions
The significance of Kedar Nath Singh judgment for sedition cases was once again highlighted in the recent Vinod Dua sedition case. The 1962 judgment upheld Section-124A of the Indian Penal Code, but it significantly narrowed down the provision.
- The SC struck down a sedition case filed under Section-124 A of the Indian Penal Code (IPC) against journalist Vinod Dua.
- The case was filed over Dua’s comments on his YouTube channel in which he criticized the government.
- He was charged under sections 124A (sedition), 268 (public nuisance), 501 (printing matter known to be defamatory) and 505 (statements conducive to public mischief) of the IPC.
- The SC ruled that every journalist is entitled to protection under the Kedar Nath Singh judgment and thereby dismissed the sedition charges.
What is Section 124A of IPC?
- Sedition is defined as any action that brings or attempts to bring contempt or hatred towards the government of India. Sedition cases are punishable with a maximum sentence of life imprisonment.
- It was inserted into IPC in 1870. The section was introduced initially to deal with increasing Wahabi activities between 1863 and 1870. These activities posed a challenge to the colonial government.
Facts of Kedarnath Singh v State of Bihar (1962) case:
- Kedar Nath was booked for sedition for a seditious speech during his rally at Begusarai.
- In his speech, he equated elected congress representatives with local goondas (goons). He called for taking back the rule through a general revolution and reducing capitalists, zamindars and Congress into ashes. The aim was to establish a government of the poor and the downtrodden people of India.
- He was convicted for sedition by a lower court, and later he appealed in SC over the constitutional validity of Section 124A. As per the appeal, Section-124A violated the right to free speech under Article 19 of the constitution.
SC’s ruling in Kedar Nath case:
- It upheld the constitutional validity of Section-124A however it restricted its scope for misuse.
- What constitutes sedition? – It said that any act which has an effect of subverting the Government by violent means or creating public disorder would come within the definition of sedition.
- What is not sedition? – However, mere disapproval of the measures of government with a view to demanding their improvement or alteration by lawful means is not sedition.
- Right to criticize: the Court agreed that a citizen has a right to say or write whatever he likes about the Government, or its measures, by way of criticism or comment.
- Limitations: Provided it does not incite people to violence against the Government established by law or with the intention of creating public disorder.
- The court deduced that Kedarnath’s speech gave a general reference to revolution and the element of inciting violence against the government was absent. Therefore, he was acquitted of sedition charges.
Reason behind the decision to shift the National Museum
Source: The Hindu
Syllabus: GS 1 – Art & Culture and History of India
The government is planning to shift the National Museum in Delhi to the North and South Blocks. This would serve the collection, comfort, and audience experience needs of the Museum in a better way.
- The National Museum in Delhi is a repository of India’s rich history and proud heritage.
- However, now the government has planned to shift it to the North and South Blocks.
Why the national museum is being shifted?
- Bigger space: The new location is four and a half times bigger than the current space. This would enable organizing bigger and better cultural events. Bigger space would also allow hosting national and international travelling exhibitions, which is not possible in current space.
- Advancement in technology has increased the speed of excavations in the country. This would generate greater artefacts in future which would require bigger storage space.
- Enhanced display potential: Current building only displays 6% of its 2 lakh cultural collections available with the museum. The new museum would enable the creation of additional galleries for enhancing display potential.
- Expansion of National Museum Institute: The new building would enable the expansion of the National Museum Institute (NMI). The students of NMI would benefit from a large increase in laboratory, gallery and teaching facilities.
- Further, it will allow incorporation of NMI’s programmes in Museology, Art History and Conservation along with other programmes in Archaeology, Archival Studies and so on.
- Vulnerable & old design: The current building is of outdated design and more vulnerable to disasters and pests attacks.
- The move is in line with international practices. For instance, the Egyptian Government is planning to replace the crowded Egyptian Museum in Tahrir Square in Cairo with an impressive Grand Egyptian Museum in Giza.
- There are certain challenges associated with the National Museum. But, the revamped National Museum would become the foundation for a vibrant museum movement in India.
- The government should duly preserve the artefacts until the new building is completed. Upon completion, there should be careful movement of artefacts with safe packing and robust transportation facilities.
The tussle of Digital Services Tax between India and US
Source: Click here
Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development
The US has rolled back its increased tariff on products of 6 countries including India. It now wants to negotiate, over the imposition of a digital service tax by the 6 nations. It is even willing to engage in a future trade war.
- The six countries of Austria, India, Italy, Spain, Turkey, and the U.K. had imposed a Digital Services Tax (DST) on non-resident e-commerce operators.
- In India, a 2% digital service tax was levied on trade and services offered by non-resident e-commerce operators having a turnover of over 2 crores.
What is the Digital Services Tax (DST) imposed by India?
The DST imposes a 2% tax on revenue (revenue, not income. Both are different) generated from a broad range of digital services offered in India, including
- Digital platform services
- Digital content sales
- Digital sales of a company’s own goods
- Data-related services
- Software-as-a-service, and several other categories of digital services
India’s DST only applies to “non-resident” companies. The tax applies as of April 1, 2020, with no retrospective element (retrospective taxation means tax has to be paid on income earned in the past).
Based on this, The Office of the United States Trade Representative (USTR) began an investigation (in June 2020) to find out the discriminatory nature of these digital taxes imposed by six countries.
What did the USTR investigation find out?
- In January 2021, the investigations found the digital taxes to be discriminatory in nature.
- With respect to India, investigations concluded that India’s digital services tax (DST) of 2% discriminates against US digital companies and is inconsistent with principles of international taxation
How did US react to the findings of the investigations?
- The US announced 25% tariffs on over $2 billion worth of imports from the six countries including India.
- However, it immediately suspended the duties to allow time for international tax negotiations and due to the poor economic condition of countries during the pandemic era.
What does this retaliatory move by US indicate?
- First, the move shows that a hefty tax can be imposed on other countries under Section 301 of the U.S. Trade Act of 1974.
- The section authorizes the President to take all appropriate action, including tariff-based and non-tariff-based retaliation against foreign countries.
- The objective is to obtain the removal of any act, policy, or practice that violates an international trade agreement or is unjustified, unreasonable, or restricts U.S. commerce.
- Second, the move shows the U.S.’s may be willing to start a trade war for protecting the interests of its tech giants against the imposition of Digital Taxes.
- Third, similar to the Trump administration, the new Biden administration also views digital taxes to be discriminatory in nature. It also wants dominance of the global playing field by the American tech firms without fear of being slapped with tax liabilities.
- The countries should engage and negotiate peacefully on the concerning provisions. Imposition of unnecessary barriers by either side would only generate adverse results.
- For instance, U.S tariffs would impact $118 million worth of Indian exports to the country.
- Co-operation is desired as the world can hardly afford another tariff war in the post-COVID era.