GS Analyst: Daily Current Affairs

Context:

The Electoral bonds case has highlighted the issues in India, raising concerns about transparency, legislative amendments, citizens' right to know, and proposing alternatives.

Electoral Bonds and Transparency

• Intentions vs. Reality: Electoral bonds introduced in 2017 for transparent political funding.
• Anonymity Quandary: Instead, allowed anonymous donations up to ?200 crore, undermining transparency.
• Transparency Compromised: Raises doubts about true motive behind donor anonymity and potential quid pro quo arrangements.

Regulatory Changes and Concerns

• Legislative Overhaul: Finance Act of 2017 amended several laws to pave way for electoral bonds.
• Corporate Contributions: Eliminated 7.5% profit limit on company donations, potentially legitimizing crony capitalism.
• Foreign Funding Shielded: Retroactive amendment shielded foreign financing of Indian elections from scrutiny.

Citizens' Right to Information

• Apex Court's Precedent: Citizens' right to know settled by apex court in 2003 for transparency in elections.
• Challenges: Attorney General's argument of "reasonable restrictions" on citizens' right to know questioned.
• Proposals for Enhanced Transparency: Suggestions for public funding or a National Election Fund to eliminate secrecy concerns.

Context:

The global demographic shifts are turning its focus on India's ageing population, fertility trends, and their geopolitical and socio-economic implications.

India's Population Dynamics

• India Overtaking China: India to surpass China in population, posing challenges and opportunities for the nation.
• Elderly Growth Spurt: UNFPA predicts rapid growth of elderly population, leading to economic and healthcare implications.
• Changing Fertility Dynamics: Fertility rates dropping below replacement level, urban areas akin to developed nations, altering demographic landscape.

Global Demographic Trends

• Aging World: Global ageing phenomenon accelerates; elderly populations increase while birth rates decline.
• China's Demographic Challenge: China's population decline shifts geopolitical dynamics, highlighting the role of reproductive rights and immigration.
• Population decline in Asia and Europe anticipated, signaling major geopolitical shifts in the 21st century.

Navigating India's Demographic Future

• Adapting to Demographic Transition: India must strategize for ageing population, ensuring healthcare, work-life balance, and reproductive rights for women.
• Socio-Economic Resilience: Preparedness for demographic changes crucial for India's continued socio-economic development and geopolitical relevance.
• Way forward:
• Suggestions include increasing awareness about elderly schemes, regulating Old Age Homes, and promoting in-situ aging.

Context:

The evolving landscape of tax treaties in India, emphasise on the need for careful interpretation and review. It highlights recent challenges arising from changing economic circumstances and legislative shifts.

Shifting Grounds of Tax Treaties

• Dynamic Nature of Tax Treaties: Tax treaties subject to interpretation due to evolving legislation and economic circumstances, as recently witnessed in India.
• Changing Dynamics: Pre-1995 treaties with France, the Netherlands, and Switzerland, tied benefits to OECD membership, but dynamics changed post-1995.
• Reevaluating Tax Benefits: Accession of countries to OECD prompted reevaluation of tax benefits, leading to legal and interpretative challenges.

Interpreting Treaty Terms and Investor Response

• Unilateral Tax Rates: France, the Netherlands, and Switzerland unilaterally extended lower tax rates retrospectively, based on OECD accession dates.
• Taxpayer Response: Delhi High Court's Concentrix case ruled in favor of treaty extension without notification, leading to taxpayer applications for low tax deductions.
• Supreme Court's Clarification: CBDT's 2022 circular provided some clarity, but Supreme Court's ruling emphasized mandatory notification for Most Favored Nation (MFN) invocation.

Necessity for Treaty Reviews

• Balancing Fairness: MFN provision meant to prevent preferential treatment, but using it without notification undermines legislative process.
• Ensuring Consistency: Varying dividend treatment across treaties necessitates clarity from tax department before application.
• Importance of Regular Treaty Reviews: Need for periodic review of tax treaties to align with economic benefits and enforce anti-abuse measures in changing global circumstances.