Our dislike of alphabet soups apart, there are several good reasons for the government to now simply junk the proposed 20% tax collected at source (TCS) on several categories of foreign remittances through the liberalised remittance scheme (LRS). This newspaper has consistently maintained that this seems a roundabout way of reducing the LRS limit from the current $250,000 a year; that it helps neither the short-term target of revenue mobilisation nor the medium-term one of convertibility; and that it goes against the spirit of this government’s “ease-of-living” philosophy. The decision, late on Wednesday, to suspend the tax on foreign credit card spends and defer the application of the higher tax rate on other remittances to October 1 (both were supposed to come into effect on July 1), citing practical and operational problems, is itself a reason too – it clearly shows that the original policy was not clearly thought through (and it is still not clear why it was then announced). At best, it was overkill, a classic bureaucratic response to deal with a few cases of violations.
Some policies are universally unpopular because they force people and organisations to change practices and behaviours to do the right thing; others are universally unpopular because they are wrong. This is a case of the latter. Wednesday’s decision, while it has been welcomed across the board, has merely postponed the problem; the government would do well to resolve it by simply scrapping the proposal.
