Day: June 30, 2017

India is set to rollout a momentous tax reform at midnight Friday that will transform the country of 1.3 billion people into a single market.

The Goods and Services Tax (GST) will replace an entanglement of more than a dozen confusing levies with a single tax and bring down barriers between states.

But the transition is bringing upheaval. The new tax has sparked strikes, protests and concerns it could disrupt many businesses unprepared for a leap into the digital economy.

In markets across the country, confusion and chaos prevail among millions of small shopkeepers and traders, who have for decades maintained records in dusty ledgers and issued paper receipts to customers. Some are hurriedly investing in computers as new rules require all but the smallest businesses to submit online taxes every month.

Calculator to computer

Suresh Kumar, who runs a family owned store in a bustling neighborhood market in New Delhi, has never operated a computer and does not have an Internet connection in his shop. His customers mostly pay in cash and a calculator on his counter is the only modern gadget he has used since he opened this shop 47 years ago.

“How will I pay the salary of an accountant? I can barely cover the costs of these three men who help me,” Kumar said, pointing out that stores like his run on wafer-thin profit margins to stay in business.

The archaic accounting systems that were the method of operation of thousands of shops and traders also kept them out of the formal economy.

But as GST draws them into the tax net, government revenues are expected to get a huge boost in a country where tax compliance has been very low.

​Growing pains

The government agrees there will be growing pains due to the scale of the task ahead but points to long-term advantages. Over time, the new tax is expected to add about 2 percent to gross domestic output and vastly improve business efficiencies in the world’s fastest growing economy.

Economists say the GST will be a benefit for manufacturers, because it will free up domestic trade by cutting through a gigantic bureaucracy that involved a myriad of tax inspectors and checkpoints at state borders.

At the moment, trucks transporting goods lose an estimated 60 percent of transit time as they wait at state borders. Paying bribes was a fact of life accepted by businesses.

The tax will also make India’s $2 trillion economy more attractive to investors as it makes the economy more transparent.

More time needed

But in recent weeks many businesses have called for a postponement of the July 1 rollout, saying they did not get enough time to prepare.

K.E. Raghunathan, president of the All India Manufacturers Organization, said businesses need more time to adjust.

“The way it is being implemented, it is bound to create lots of chaotic conditions,” he said.

Underlining concerns of millions of small and medium manufacturers, he said, “they neither have the wherewithal to understand the sudden implementation and if they approach chartered accountants or consultants, it costs lots of money.”

A big concern is that the GST being rolled out by India is far more complex than that introduced by other countries where a single rate prevails. There will be four layers of taxation with rates of 5, 12, 18 and 28 percent.

Manufacturers and traders complain the different levels are creating confusion.

More than 50,000 textile traders went on strike this week. Thousands of other traders shut businesses Friday.

Many big and small retailers worried about the switchover have been offering massive discount sales across the country to get rid of their inventories.

Government pushes ahead

But the government has brushed aside concerns about businesses not being prepared for the switchover. 

“If he is still not ready, then I am afraid he does not want to be ready,” said Finance Minister Arun Jaitley recently as he rejected calls for a delay of the rollout.

Businesses say the tax rollout is the second disruption they have faced, coming months after Prime Minister Narendra Modi’s radical move to scrap 86 percent of the country’s currency, which slowed the economy.

As customers pour into his shop to buy stationery and other items, New Delhi shopkeeper Vimal Jain wonders whether he will handle customers or enter transactions in a computer starting Saturday. 

“Now this is another headache,” he said. “We had barely begun to recover from demonetization and now this sword hangs over our head.”

The tax will be ushered in at a grand midnight ceremony in parliament, but even that has become contentious. Calling it a “publicity stunt,” the main opposition Congress Party and several other parties have said they will boycott the special session.
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U.S. economic growth in the first quarter of 2017 was better than expected but not by much. The Commerce Department says U.S. GDP, the broadest measure of goods and services produced in the country, grew 1.4 percent from January to March, 0.2 percent faster than the previous estimate. But many analysts believe U.S. growth will improve in the second quarter. And growth prospects for the global economy are the best they’ve been in six years. Mil Arcega has more.
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It looked like a hostage swap, only the currency was livestock and the mission was to end decades of deadly clashes.

More than 50 sheep, goats and cows stood in the scorching heat of a desolate no-man’s land in arid northern Kenya, as Maasai and Samburu herders negotiated their handover.

Lipan Kitonga cast a critical eye over his emaciated herd, which 10 gun-toting Samburu had stolen from his home in Isiolo County, 300 kilometres (186 miles) north of Kenya’s capital.

“I was not around at the time,” said Kitonga, a community-based police officer, known as a police reservist, dressed in camouflage fatigues with a G3 rifle in hand. “Otherwise it would have been a different matter,” he said, his voice still tight with anger nine days after the animal theft.

Drought and violence

Nomadic herders in remote northern Kenya, which is awash with illegal arms, frequently raid cattle from each other and fight over scarce pasture and water, especially during droughts.

A wave of violence has hit Isiolo’s neighboring Laikipia region in recent months as armed herders searching for grazing have driven tens of thousands of cattle onto private farms and ranches from denuded communal land.

The livestock exchange was organized by the Northern Rangelands Trust (NRT), a charity set up in 2004 with support from donors and conservationists to reduce conflict and poverty among nomads by helping them better manage their land.

Almost 300,000 people are members of NRT’s 33 conservancies, which are community organizations focused on conservation, owning nearly 6 million acres (2.4 million hectares) of land across Kenya’s north and coast.

Nomads no more

Drought has hit millions this year in northern Kenya, where most people live off their livestock. As Kenya’s population has doubled in 25 years, nomads can no longer freely follow the rains, turning some overgrazed common lands to dust.

“You have got more people, with more livestock, on less and less productive rangeland and it’s a really explosive situation,” said Mike Harrison, chief executive of NRT, funded by the U.S. Agency for International Development (USAID). “The only answer to this is that everybody has to invest in improving their land.”

NRT promotes rotational grazing with a sustainable number of livestock, which allows land to rest, and the reseeding of degraded areas. Zones are set aside for wildlife, people and livestock, with limited access during drought for nomadic animals from other communities.

It also helps develop new businesses — tourism, bead-making and livestock markets — so nomads are less dependent on herding.

Tourism is the real money-spinner.

The most successful conservancies earn about $500,000 a year from visitors paying daily entry fees of $50-$80, Harrison said.

These earnings go into a community fund with 40 percent spent on operations, such as rangers’ salaries, and 60 percent on community projects, such as education and health, NRT says.

Shootouts

One of NRT’s main achievements has been to reduce conflict, cattle rustling and poaching by funding more than 500 rangers, trained by Kenya Wildlife Service, to patrol members’ land.

Many are police reservists, like Kitonga, issued rifles by the government to back up the overstretched police.

In Nasuulu, just north of Isiolo town, the Samburu, Turkana, Somali and Borana — who have traditionally fought each other — have come together to form one conservancy, an NRT member.

“They never used to talk to each other before, but they are now working together,” said Omar Godana, Nasuulu’s chairman.

Wildlife protected, too

Elephant poaching has stopped on 35,000 hectare (86,487 acre) Nasuulu since 12 NRT-funded scouts were deployed, he said.

NRT’s mobile security teams work with the police and wildlife service and receive aircraft and tracker-dog backup from a nearby wildlife conservancy, Lewa.

With increased security and strict controls on grazing, shootouts between armed herders and rangers are inevitable.

“It’s a killer squad,” said John Leparsanti, a Samburu herder in Laikipia who sees the crackdown on illegal grazing on NRT conservancies as a threat to his traditional way of life. “When there is a biting drought we cannot graze.”

Herding is key to the identity and culture of Kenya’s nomads, whose young men are initiated as warriors in colorful ceremonies where each kills a cow and drinks its blood. Their role as ‘morans’ is to guard the community and its animals.

Livestock provide nomads with a ready income because they can be sold quickly for cash. Pastoralists often do not have bank accounts and have high illiteracy rates because they roam over vast terrains with their cattle from a young age.

“We are not ready to do business like other tribes because we believe in cows,” said Samburu politician Mathew Lempurkel. “What are we going to replace them with?”

Harrison says less than 1 percent of NRT members’ land is set aside exclusively for wildlife.

Livestock is life

In remote, insecure lands, with poor roads and patchy mobile phone networks, there are no obvious alternative ways of life.

“If we went to say: ‘Look, you’ve all got to cut your livestock numbers in half, we would be laughed out the door,” Harrison said. “It’s a long slow process of rethinking what the incentives might be, trying different options.”

The authority of elders who used to control shared grazing land has been eroded by centralized government rule and modern education, experts say.

As climate change has brought increasingly frequent and prolonged drought and less grass, herders are keeping more goats as they can browse on shrubs and young shoots, unlike cattle.

The goats rip out the grass roots, further degrading the rangeland and reinforcing the vicious downwards cycle.

Some northern counties have formalized traditional land management customs in local bylaws, with the aim of giving power back to elders, in contrast to NRT’s approach of supporting decision-making by conservancy boards of directors.

“When you have the elders managing, there is enhanced ownership and the feeling of exclusion is not there,” said George Wamwere-Njoroge, an expert with the International Livestock Research Institute, which supports such initiatives.

ILRI is also encouraging herders to keep fewer, healthier animals, which fetch a better price at local markets, instead of trucking their cattle for 24 hours to the capital, Nairobi, where cartels control sales, he said.

Status cows

One solution, rarely discussed by politicians, would be to reduce the number of livestock owned by wealthy, urban elites, who keep vast herds on northern lands as a status symbol.

Unlike in the past, when droughts would naturally have reduced livestock numbers, the elites ship in hay and water to keep their animals alive.

“A lot of destitute pastoralists have dropped out and moved to the small trading centers and depend on relief and petty trade,” said Wamwere-Njoroge. “But the elite pastoralist animals keep on going.”
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