Shishir Sinha

Became journalist by chance but enjoy boring policy reporting. Love watching serious political drama, but yet to learn the trick of reporting them.

Shishir Sinha

Sin surcharge for others' sins

Shishir Sinha | Updated on April 27, 2013 Published on April 27, 2013

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Mamata Banerjee's decision to impose surcharge on cigarettes is sin surcharge for other's sin

Bargaining over the price of vegetable, fruits and items for daily use is very common, but how many of us bargain over a pack of cigarettes, bidi, guthka or even on your favourite bottle of liquor? Although the rate of inflation for these goods is much higher, we still prefer not to voice our concern. This might have prompted Mamata di to impose a surcharge on cigarettes to pay the affected depositors of Saradha group.

You may call this merit of demerit goods! Simply speaking, these goods are considered unhealthy or damaging someone mentally or morally. These goods are also a safe bet for the Government to raise tax every year or any time during the year. Such tax is also known as ‘Sin Tax.’ Due to revenue consideration, most Governments in India prefer not to ban these items. However, whenever it increases the tax, its common argument is that this is being done to reduce the consumption. Sometime, in place of tax, surcharge is levied. Tax is usually for a longer period, while surcharge is for specific period with a specific purpose.

Has consumption really come down? Certainly not, in fact it has gone up. This is a good sign as this is giving an opportunity for the Government to impose many more surcharges to pay affected investors and depositors of companies. So, tomorrow, you might have JVG surcharge on cigarettes, Kuber surcharge on guthka, Golden Forest Surcharge on country-made liquor, ABC surcharge on Indian-made foreign liquor, XYZ surcharge on tobacco and so on.

Can you recall these names - JVG group, Kuber group, Golden Forest and even StockGuru? These are companies whose promoters, with the help of their agents, conned people by promising higher returns on their investors. Promoters of these companies were arrested and their assets made from ill earned money seized. We saw tears, anger, protest, slogans against the system and some legal action. But then what? Any relief for affected people, and have they got their money back? Not yet.

Such groups were there, are there and will be there. There are two reasons for that. First is plethora of law and regulators. Consider this, for a chit fund company, regulator will be respective State Governments, for Nidhi Company, regulator will be a Central Government Ministry which is Ministry of Corporate Affairs and for Non banking Finance Companies, the Reserve Bank of India is the regulator. Do not forget, if some organisation is floating ‘Collective Investment Scheme', then it has to approach SEBI.

Fair enough, but for the common man all these companies seem to be similar as they collect money by offering much higher return. There you will get the second reason for the growth of Saradhas, JVGs, Kubers and Golden Forests. These kind of companies simply play on greed. There is no doubt that most of us, mind it most of us, cannot control our greed.

Do we really ask that if banks and Small Saving Instruments are offering return in the range of 8 to 9.5 per cent for deposit instruments, how can someone offer 12-14 or even 16 per cent. The worst thing is that such returns are offered not just only in villages or small towns, but also in big cities such as Delhi, Kolkata, Mumbai, Ahmedabad and so on. One can understand that it is not very easy for a villager to verify all the claims, but what about those in big cities. They are the ones who shout first when the promoters of such company shut their shop and run away and start blaming regulators and the Government.

Then there is another problem, who to approach for any relief. When they approach one, it says that it is not in their jurisdiction, go to other. Of course police is there to arrest these people and put them behind bars. Then there is court which orders seizure of assets and freezes bank accounts of guilty promoters. But still investors/depositors have to wait endlessly for refund.

Now, in order to provide some sort of relief, probably for the first time, any State Government has used demerit goods. Now there is a possibility that it might become a trend. If it happens, that sin tax will become a tool to pay back sins of others. The worst part is that even if somebody has not committed a sin, will have to pay more and more sin tax or sin surcharge.

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Published on April 27, 2013
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