The Hindu Business Line : Traders campaign against VAT

Campaign leaflets of the co-ordination committee of traders in Kerala allege that the Central Government is forcing on the country a global system of Value Added Tax (VAT) under the dictates of the World Trade Organisation. The traders are afraid that, with the introduction of VAT, global monopolies and Multinational Corporations will take over retail trade in the country. These fears are not entirely unfounded, especially in the context of the speculated permission for 100 per cent FDI in retail trade.

VAT aims at the unification of the national market, by rationalising and simplifying the national tax regime. Local traders and small businessmen, as well as small and traditional industries will face stifling competition from large global players, once these natural barriers of taxation are demolished.

The present system of indirect taxation has helped to integrate the national market to a desirable or tolerable level, but offers considerable resistance to import trade.VAT is therefore counter-revolutionary and unconstitutional. It will prove to be too complicated a system for India's political economy, which is dominated by the informal sector. The virtue of transparency claimed by VAT in the West is really that of its developed economy dominated by its formal sector. It will be yet another quixotic reform: By now, we have seen several such, all falling by the way side, and inflicting heavy costs on the national economy.

K Vijayachandran

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Traders campaign against VAT