Saturday, December 3, 2016

CSR : A beta for national development policies

Corporate Social Responsibility (CSR) is supposed to be a voluntary activity to be done by those corporations and businesses who want to go beyond their calling of making profits.

One can argue that businesses are not geared up to do this kind of work and the Government should have merely levied a tax and done the work themselves.  Viewed in this pragmatic lens, putting the onus of CSR  on businesses can be deemed to have a nuisance and a highly negative policy. If they accuse the Kshatriya of asking the vaishya to do his work, they are probably very right.

But if we pause  there may be something of very great value in this intrusion into  the life of businesses. The Government collects taxes and uses them for law and order, administration, infrastructure and development. In the last 10 years massive amounts have been spent by the Central and state government in the hope  the the lot of the bottom 25% of this country. But most of these funds have not been very productive to put it mildly.

So this CSR provides an opportunity for corporates to come up with better plans, ideas and concepts to improve the prospects of the bottom 25% of the country's population and implement them. They could use their mandatory CSR requirements to fund  pilots of such initiatives and make a success out of them and then present them to the State and Central governments through their industrial bodies such as FICCI, CII, ASSOCHAM etc for wider adoption.

If they are successful with this kind of CSR effort they will do 2 things - improve the effectiveness of government programs which will in turn either lead to a lower tax rate or it will create a new consumers and  market for their goods and products.



Thursday, August 4, 2016

What Government of India can learn from Wimbledon !

I am Director of Company in Pune which is having a peculiar problems in scrutiny. The IT officer is insisting on the company effectively  changing its method of accounting from Mercantile method to Cash accounting, He is asking the method of revenue recognition to be made on Cash receipts than on revenue recognition based on period matching concept of accounting. These are so very well established concepts of Accounting that they should not be questioned. I discussed with CAs and I was told that is illegal for Companies to follow cash accounting and yet the Scrutinising officer is pursuing this line of investigation. I was informed that it is a waste of time and the company will win th case at all higher stages as this is the universally accepted method as per GAAP, Company law and also prevailing methods of accounting standards for software industry.

I was introspecting what is the Root cause of the problem and a positive way of handling such problems.

In my opinion the root cause of problems is that the IRS officers come from a wide variety of disciplines and have varying skills and aptitudes. I can understand that they make make mistakes.

They also have to quickly learn everything and give proper judgements on a vast scale of matters. This is quite a task for people say from History or Arts or Medical background.

I was thinking how do we solve this problem at the root without wasting time of Appellate Courts etc ?

I got an idea came to me when watching Wimbledon this year.

Wimbledon situation

The ball moves at very high speed upto 200 km/hr and the line umpires have to make spot decisions. They have a thousand things on their mind and humans even the best of them are prone to making mistakes due to the mechanism of the mind. These mistakes can make or break a player's career. So Wimbledon a place which values tradition has come up with a solution which uses technology in a restricted manner using Review option. The player calls for a review and a higher technology which is less error prone is used to instantly settle the dispute ! The Review lapses if the player loses the review so he/she can't abuse the system.

Based on this I would like to propose an idea for tax reform for CBDT.

During every scrutiny the Assess should be given 1 or 2 Scrutiny Review Options so that any thing technical like Revenue recognition etc  can be reviewed by a technical panel based on whose expert opinion the scrutiny can be completed, The online portals can be used for the Review so that time is not wasted in movement of papers.

Lastly if the Assessee wins the Review he should still have reviews left.

This measure will use the Adminstrative experience of the IRS officers with the Technical experience of the Central panel which can deliver Reviews that will eliminate wastage of time of Appeals and Appellate Tribunals and High Courts and Supreme Courts.  Higher salary can be given and highly accomplished people can be kept on these panels so that these disputes can be resolved at the time of creation. The time of the august institutions can be freed up to use for serious cases so that the series offenders are dealt with harshly and severely thereby deterring people from breaking the law.

I request readers of this blog to take this idea to as many decision makers as possible so that we can add another mechanism to make Improve Ease of doing business across various government ministries.



Saturday, March 5, 2016

Time to say Thank you Europe and America and take back our billions from them

Many years ago I met a person who worked at an US think tank. They had done a study for the US government in the 1990s and calculated that the cost to the US state of producing a world class  Engineer or a management graduate was in the region of US$ 250,000 to US$300,000. So they advocated an easy visa policy for such individuals so that the US could get such easily trained persons at short notice. He also mentioned that this was a strange situation  where the developing country was actually subsidising he developed country and getting aid with very high multiplier effects from them

This person also said that they studied  the racial origins of Maths Ph.Ds and found that hardly any US Caucasian was doing a Ph.d in Maths. They realised its importance to the future of computing and recommended to the US government that when person gets a Maths  Ph.d degree from a good university the US government should immediately confer an US citizenship on that person.

This shows the nuanced understanding of the US system on the role of human resources and how to quickly absorb and leverage such resources when they come your way.

After decades of losing our smart people to the West we are now in a position to reclaim back our  prized assets namely our talented people who are now well trained.  In unregulated  fields like management  and engineering this does not require any policy changes. This may partly explain the explosion in new ventures in engineering and technology in India by returning diaspora. However other regulated fields such as medicine require regulatory approval and need policy interventions and procedural changes to make time bound the approval process to include such professionals in our workforce.

This also includes the need to harmonise the degrees as different countries in Europe, the US may give different names to the same education. Even in India, the Post graduate  education in management is  called Post Graduate  Diploma in Management in one Government institution and the Masters in Business Administration  by another Government institution. The same degree in Engineering is called Bachelor of Technology in an IIT and Bachelor of Engineering in some other government engineering college.

In this regard we should learn from the US system which is very alert to study the various degrees in other countries and recognise them appropriately and harmonise them with their system.

This requires us to have a fast track method  to study and validate equivalence of various degrees and issue requisite permissions in a time bound manner for talented and trained Indians to come back and join the workforce.

This could be a bottleneck in medicine and other fields.

This is an issue as I personally found out in the case of one of my neighbours Anirban and Sonali. Anirban is an IIT Bombay graduate  and Ph.d from Princeton University. He and his wife Sonali wanted to return to India and work in India and do something for the country. He is a faculty at IISER, Pune  Sonali is a Doctor of Osteopathic Medicine who practises in India. Her degree is the equivalent of MD in America but it is not accepted in India. As a result she is not able to practice in India. As a result they are living in separate continents despite having a small child also now. The details of this case is in this blog.

The Government should look into this case and more importantly the policy to  remove all bottlenecks and make the best of this opportunity. If we are able to get 10,000 highly trained people  we could easily save $ 500,000 per individual in training people to this level which would amount to taking a gift of $ 5 billion or Rs 35000 crores from US and Europe . This does not even include the downstream effects of employment generation and taxes generated for the country and the rapid advancement that would be possible within a short time. Needless to say it would take us at least 15-20 years to build up a bank of such competent people if we did it from scratch not to mention the significant costs.