06 June 2008
Global capitalists in Kerala paying abnormally high wages
You've heard of capitalists exploiting workers by paying sub-subsistence wages. Now they've gotten more devious. They're exploiting workers by paying abnormally high wages. I kid you not. Here's an excerpt from The Hindu of 4 June 2008 published from Thiruvananthapuram.
"The high wages offered by contractors at the Smart City construction site in Kochi have begun to affect the coir industry in adjoining Alappuzha district," according to Minister for Coir G. Sudhakaran.
"If things are going to be like this, we may have to take up the issue with the Chief Minister," Mr Sudhakaran said at a workshop on the use of coir as a geo-textile here on Tuesday.
He said it was improper for the Smart City contractors to offer "abnormally high wages" at their work site. Many coir workers from Alappuzha were boarding the morning trains to Kochi, lured by the offer of up to Rs 400-a-day for manual labour.
He said there was a limit to what a traditional industry such as coir could offer as wages.
Workers, especially the youth, were leaving the coir industry.
He described the high wages offered in Kochi as "the trickery of international capital". For a period of time the international capital would buy labour at high rates, only to get rid of it later.
On returning home, the workers would find their traditional means of livelihood gone, he said.
The Minister said this was not the kind of development Kerala needed. New-age industries should come to the State providing jobs to the educated youth.
At the same time, growth in that sector should not destroy traditional sectors such as the coir indutry which sustained several lakhs of poor families in the State, he said.
Very interestingly, the paper's archives column "This Day That Age" carried this item, dated 4 June 1958:
Mr Mao Tse Tung, Chinese Communist head of state, in his first published pronouncement for a year, on June 1 praised the poverty of the Chinese people as an incentive to revolution. Mr Mao was writing in the first issue of Red Flag, the new fortnightly theoretical review of the Chinese Communist Party. He wrote: "This seems a bad thing but it is in fact a good thing. The poor people want a change, want to do things, want revolution." Mr Mao said that "the political consciousness of the masses is rising rapidly" and "never before have the masses been so spirited, with such high morale and so strongly determined." He added: "The decisive factor besides the leadership of the party is the 600 million people. The more people, the more views and suggestions, the more intense the fervour and greater the energy." The article, which bears the stamp of Mr Mao's classical literary style, is rich in metaphor.
Category: Communism
22 March 2008
Baba Amte: The youngest of the young
An article I wrote on Baba Amte has appeared in a recent issue of Tehelka.
Category: Miscellaneous
09 March 2008
Income Tax Officer Arrested in Nanda Case
Another day in the life of an income tax officer. From a PTI report.
Arms dealer Suresh Nanda, charged with receiving kickbacks in defence deals, his son and two others have been arrested by CBI for allegedly conspiring to fudge their account books seized by the IT department during a raid last year.
They were arrested in Mumbai on Saturday night by the investigative agency after registering a case against Nandas, Income Tax Deputy Director Ashutosh Verma and chartered accountant Bipin Shah, official sources said on Sunday.
Verma, an Indian Revenue Service officer of 1999 batch, is alleged to have helped the Nandas in fudging account books seized during a raid in February last year, they said.
Nanda's chartered accountant and the income tax officer were also accused of trying to manipulate IT orders in the favour of Nandas. The IT department had searched 20 premises of arms dealer Nanda, in Delhi and in Mumbai and claimed to have recovered cash worth several lakh of rupees and a large number of documents.
Damn surprised, aren't we?
Category: Income-Tax
07 February 2008
If you hitch one blind man to another, will they be able to figure out the way? Microsoft apparently believes they will. Or so it would seem from its unsolicited bid for Yahoo.
It's a strange belief. Anyone who does a fair bit of searching every day will know that neither Yahoo! nor Microsoft know much about search. Their skills in search are not complementary so it is not at all clear how buying Yahoo will help Microsoft at all.
If I were a Yahoo shareholder I would welcome the bid of course. My strategy would be to sell out for the combination of cash + Microsoft shares, and sell the Microsoft shares at the earliest opportunity. Its share price can only go down because the merger, if it goes through, could well be the biggest error in Microsoft's history. And the costliest too.
As a Yahoo employee, however, my strategy would be to forget about search and use Google as the default search engine on its site, which is of course what Yahoo was doing until February 2004, that is to say, just three years ago.
It might also not be a bad idea to use Google Adsense on all or most of Yahoo's pages, perhaps after wangling a deal so that Yahoo gets to keep 95% or so of the revenue. This is the right moment to push through such a deal because Google is anxious to keep Yahoo out of Microsoft's hands. But even here, Yahoo would need to reduce the clutter on its pages to give AdSense some chance of figuring out what ads are most suited to them.
Much has been written about Yahoo's Panama technology. It's my belief that it will be a failure because the click rate for ads on a page depends on how accurately the ads match the content of the page. Panama will fail for the same reason that Yahoo has failed in search, because matching ads to page content requires superior search technology.
Yahoo's present pathetic condition is saddening because at one time it was "the portal" to the Internet. But Internet lifespans are shorter than industrial lifespans. Look at Netscape, AOL, Altavista ...
Category: Search-Engines
24 January 2008
My Experiences with the Income Tax Department -- 11
[A single-page version of this blog can be seen here]
The reader may be surprised that, far from having embittered me, my five-year-old-and-continuing encounter with the income tax has actually been a source of some amusement to me. But it wasn't always so.
When the encounter began I was convinced that the department was full of crooks to the extent that "an honest income tax officer is a contradiction in terms". I never expected to win an appeal as long as the process was still within the confines of the department. It was therefore quite a surprise when I won at the stage of Commissioner of Income Tax (Appeals). I now believe that the system leaves some scope for an honest tax payer to fight and win. You do not have to succumb. And no matter the number of bad eggs in the IT Department you must remember that at some stage it passes out of the control of the department. I am thus in some ways more of an optimist than I was five years ago.
But I think there is a bigger philosophical issue, the issue of "moral hazard" (thanks to Niranjan Rajadhyaksha for jogging my memory on this term).
Here is what Wikipedia says about the subject: "Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions."
This is what I meant when I wrote at the time: "If I win the case after fighting it out for two years [oh, the optimist in me!] it will be at the cost of much time, money and mental tension, all of which could have been devoted to earning more money for myself and indirectly for the exchequer. The income-tax department too will have to spend a lot of resources to fight me. The only winner in the case will be Mr Sebastian. If the IT department loses the case he loses nothing. But he stands to gain Rs 10 lakh or more (I estimate that is the order of the bribe he expects) at zero risk to himself."
The chapter headings of the Income Tax Officer’s Concise Manual on Harassing the Tax Payer read as below:
1. Pass an adverse assessment order, never mind that it won’t stand scrutiny at any stage.
2. Don’t bother to present a cogent defence when the tax payer files an appeal.
3. When the tax payer wins the appeal file an appeal against the verdict.
4. Don’t bother to present a cogent defence when the appeal comes up for hearing
5. When the tax payer wins the appeal file an appeal against the verdict.
6. Don’t bother to present a cogent defence when the appeal comes up for hearing.
7. When the tax payer wins the appeal file an appeal against the verdict
See the problem? No higher authority bothers to ask the assessing officer or the officers who file appeals why they acted as they did. They run no risk whatsoever. And it doesn’t take much effort to file an appeal. All it takes is a clerk who can type out a single page. But the tax payer has to hire consultants and lawyers to fight it out for another year or two. The pain is all on one side.
As it stands the only way an income tax officer can be prosecuted today is if he is caught red handed accepting a bribe. And the department has long gone beyond the stage when it can be caught in such a simple-minded fashion. These days I am told the tax payer is asked to leave money in a magazine in the officer’s bathroom. "Hey, I just picked up the magazine with the intention of returning it to the owner. Never looked into it."
On the issue of moral hazard Wikipedia goes further to say: "A special case of moral hazard is called a principal-agent problem, where one party, called an agent, acts on behalf of another party, called the principal. The agent usually has more information about his actions or intentions than the principal does, because the principal usually cannot perfectly monitor the agent. The agent may have an incentive to act inappropriately (from the view of the principal) if the interests of the agent and the principal are not aligned."
In this case the principal is the government. And as long as the government is interested merely in total tax collections and will not act in any way whatsoever against the kind of crook who writes foolish assessment orders (take a look at this case) or files stupid appeals the tax payer can only expect to be harassed while the tax official amasses tens of crores of rupees. Remember the scandal a few years ago when someone in the finance ministry was caught accepting bribes to post income tax officials to Mumbai?
The system can improve only if some risk is placed on the income tax officials. Imagine that a crook of the kind mentioned above is summoned by a very high-level judicial officer. The conversation may proceed somewhat as follows: "You are allowed to plead temporary insanity at the time of writing the assessement order/filing the appeal. Tests will also be conducted to verify that you are indeed above the idiot class. If you fail the tests you will be acquitted of all charges and your job. If you pass the test and do not plead insanity you will have to present a defence of your assessment order/appeal."
I am not optimistic enough to expect something like the above to happen anytime soon. Until it happens the crooked tax official will have a field day. The only way out at present is to make the crook think twice by making public the utterly foolish assessment reports he writes or the utterly foolish nature of the appeals he files. In terms of moral hazard, there needs to be a change in the zero-risk nature of the actions he takes.
Category: Income-Tax