Karnataka’s Tax Exemption for Paa Not Justified
The Karnataka government granted a 50% tax exception (entertainment tax) to the Bollywood movie Paa starring Amitabh Bachchan and his son Abhishek Bachchan. Prior to the Karnataka governments decision the Gujarat government granted a total waiver from entertainment tax after Amitabh Bachchan met Narendra Modi who is the Chief Minister of Gujarat. What are the justifications for these decisions and does the public benefit?
The arbitrary manner in which state governments give tax exemptions for movies is a cause for concern. Recently the Kerala government gave tax exemptions to the movie Pazhassi Raja which was supposedly the most expensive movie made in Kerala (Rs. 27 Crore). A case was filed and the Kerala High Court issued a ruling that the benefit of the exemption should be passed on to the paying audience and not to the movie theatre or to the producer of the movie.
Paa has a story line like thousands of other Bollywood movies except for the fact that one of the characters played by Amitabh has a rare genetic defect (the storyline is very similar to two Hollywood movies namely “Jack” and “The Curious Case of Benjamin Button”). But should the governments grant tax benefits just because the storyline includes a character with a genetic defect?
Most Bollywood movies (for that matter most mainstream movies in the world have some sort of social message). There are good and bad characters and there is conflict between them and the good (in most cases) comes out on top in the end. There is no question that the producers of Paa (Reliance Big Pictures) had profits in mind before production actually began (this is slightly different from a movie like Gandhi which was partly financed by the Government of India). There is nothing to indicate that the individuals involved in making the movie either worked at a below market rates or for free. Everybody got paid except the taxpayer.
Tax benefits are normally granted with the expectation that the state or its citizens will get something back in return. Cities like Philadelphia offer 10 year tax free status if you buy property in certain areas. This is to prevent people from leaving the city for the suburbs. Countries like India and China have economic zones where the tax rates are much lower than normal. This encourages domestic and foreign investment which will in turn provide jobs for the local population. You can even provide exemptions if there is an agreement that the monies will be reinvested in the state or will be donated for a charitable cause. What are we supposed to gain by completely waiving or decreasing the tax rates for another nondescript Bollywood movie?
Although we started liberalizing our economy in the early nineties we still have a centrally planned economy. The central government still is responsible for state government budgets. This policy over the years has resulted in state governments implementing policies that absolutely do not make financial sence (it is like giving candy to a child).
Although the southern states are the most important engines of the Indian economy all four southern states are in deep financial trouble and have massive deficits. The only reason why they are not bankrupt is because the central government keeps “propping” them up. All American states except a few like Alaska are completely responsible for their own budget and many of these states are constitutionally prohibited from running deficits meaning that the state budgets should always be balanced. We need these laws in India.
When states like Karnataka, Kerala, Tamil Nadu and Gujarat provide tax benefits for movies that are not even made in the state then the people of these states are the losers. This is the money that the people and the state need that is not collected. So how does the state go about making up the difference? This maybe done by increasing the price of food and other basic necessities, postponing investments in infrastructure projects, not cleaning streets and so on. Is the Indian public and actors like Amitabh Bachchan ok with this plan?
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Category: Sports & Entertainment
Any Govt works within the spellings of the rule books.
I could raise 100s of decisions which are not in public benefit,—but that is it
Government also represents the peoples interests.
i remember earlier when tax was exempted of any movie…the ticket used to become cheaper……don’t know if we still get that benefit……….one point want make…..the movie is no way closer to the curious case of Benjamin Button…….the main or lead character in movies are suffering from totally different…..disorders………
but i really hope people or audience get’s the benefit of the tax exemption not the distributor……
It looks like the only people who will benefit will be the producers. The statement did not say anything about reduced ticket prices.