TP Saran

NRPT and Tax on interest will need revisiting

 

In this world, there is nothing wholly bad or wholly good: it all depends what one makes of it. So too has been the notorious National Residential Property Tax and the tax on interest (TON), both measures introduced by the present government at the beginning of its mandate and both proving unpopular. A lot has been written about them, and they still loom large in the radar of the common man, especially the middle class. So what any future government has to propose is a matter of concern to a large proportion of the population.

 

 

 

It is true that in 2005 when the new government took over, the financial situation of the country was not the best. It was urgent to raise money, and although the rationale of the NRPT and the TON was not explained to the public at large, one can deduce that their purpose was to fill the government’s coffers. Perhaps, as far as the NRPT is concerned, the idea was also to make those who had made easy money and had several built properties to their name (but that were undeclared as such) reveal themselves and contribute their due. If this be the case, then NRPT had at least one positive aspect.

Similarly with TON: if people in the same category had amassed large sums and put them away in banks, then one way to make money get into the circulation and available was to discourage savings. There may have been other more sophisticated reasons that only World Bank technos can understand, but in the simple mind of the layman things had to be looked at in a less complicated way, one that had a direct bearing on day-to-day living.

But where these taxes seemed unfair was that at the high end – big commercial buildings in posh areas, the cybercity for example – there was an exemption. Instead, the middle class plodder who had saved hard to earn enough to borrow from bank or insurance to get a roof over his head, and had to reimburse loans as well as provide for the needs of the family simultaneously, was being made to pay.

And suppose a parent had bought a house for his child in anticipation of the latter’s future need – what is wrong about that? – then he would be paying NRPT on two residences.

Ditto for TON: after all, he was already paying both direct and indirect taxes, and then came this added burden of one additional tax-on-tax, for that’s what it amounted to. How could this be accepted without protest? The majority of the middle class folks who had anything like substantial savings in the bank or elsewhere had obtained them at the time of retirement as a lump sum, and what was saved most likely was what remained after making provision for children’s education, maybe part repayment of house loan and so on.

OK, argued the authorities, if we do not collect money from those who have, then do we get it from those who don’t have? But ah, let’s have a look at this argument: the so-called ‘haves’ were those at the lower end, not those at the higher ends: the redistribution of collection was skewed. And no allowance was made for local realities: saving for routine old age expenses, for the probable monthly in a residential care home (a growing phenomenon in Mauritius), for children’s education, for unexpected illness and so on. Had these considerations been factored in, then the following or some variants could have been the scenario:

* No NRPT on a first residence in one’s own name.
* NRPT on second and subsequent residences in one’s own name.
* A reasonable threshold for TON: it was suggested that the initial Rs 2 million be revised upwards to say Rs 4 million – hardly a big sum these days – but this was ignored.

These are just a few of the core issues and proposals about NRPT and TON from the middle class perspective. The bottomline is that they need to be revisited after taking into account several of the elements outlined; simply eliminating them would throw away the baby with the bathwater. We hope therefore that the ultraliberal thrust would be suitably reined in the next time round, and a firm undertaking given in this respect. Otherwise it will be very difficult to persuade the middle class to go for a system that it feels has penalized it enough already.

 

Amul milk: success in India, massive failure in Mauritius – why?

Formed in Anand, Gujarat1946, AMUL is a dairy cooperative in India. It is a brand name managed by an apex cooperative organisation, Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF), which today is jointly owned by some 2.8 million milk producers in Gujarat, India.

Amul spurred what has been called the White Revolution of India, which has made India the largest producer of milk and milk products in the world, with an annual turnover of US $1050 million (2006-07), and milk collection average of 10.16 million litres per day. Besides India, Amul has entered overseas markets such as UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong.

And yet, this hugely successful brand selling millions of litres of milk daily failed to take off in Mauritius, for the simple reason that the attempt at its introduction locally was badly handled. No proper market study was carried out beforehand, and no well-honed sales strategy elaborated with the help of the right professionals. Instead, it would appear that officers having no knowledge of the milk industry let alone of the Indian business environment was sent to establish contacts and to ‘negotiate.’ The venture ought to have been a private one, but it was an official initiative without the appropriate groundwork and preparation being done.

And so was doomed from the beginning, thus depriving Mauritians of a product which, properly transacted, would have cost much less than any other milk on the market. Mauritians have been the permanent losers – having to this day to pay an exorbitant price for milk. 

TP Saran

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