In China, an Unprecedented Demographic Problem Takes Shape

Analysis

AUGUST 21, 2013 | 1034  Print  Text Size 

An elderly man in Beijing. (LIU JIN/AFP/Getty Images)

Summary

Chinese society is on the verge of a structural transformation even more profound than the long and painful project of economic rebalancing, which the Communist Party is anxiously beginning to undertake. China's population is aging more rapidly than it is getting rich, giving rise to a great demographic imbalance with important implications for the Party's efforts to transform the Chinese economy and preserve its own power in the coming decade.

Analysis

Two reports in Chinese media highlight different aspects of China's unfolding demographic crunch. The Ministry of Education reported Aug. 21 that more than 13,600 primary schools closed nationwide in 2012. The ministry looked to China's dramatically shifting demographic profile to explain the widespread closures, noting that between 2011 and 2012 the number of students in primary and secondary schools fell from nearly 150 million to 145 million. It also confirmed that between 2002 and 2012, the number of students enrolled in primary schools dropped by nearly 20 percent. The ministry's report comes one day after an article in People's Daily, the government newspaper, warned of China's impending social security crisis as the number of elderly is expected to rise from 194 million in 2012 to 300 million by 2025.

The Communist Party is already considering measures to counter, or at least limit the short-term impact of, demographic changes in Chinese society. On one hand, the Party continues to flirt with relaxing the one-child policy in an effort to boost fertility rates, most recently with a potential pilot program in Shanghai that would allow only-child couples to have another child. On the other hand, the government has proposed raising the national retirement age from 55 to 60 for women and from 60 to 65 for men. If implemented, this would bring China's retirement policy more in line with international norms and delay some of the financial and other social pressures created by the ballooning number of retirees dependent on government pensions and the care of their children.

But even sweeping adjustments to the one-child policy or the national retirement age would create only temporary and partial buffers to the problem of demographic change. It is no longer clear that the one-child policy has any appreciable impact on population growth in China. China's low fertility rate (1.4 children per mother, compared with an average of 1.7 in developed countries and 2.0 in the United States) is at least as much a reflection of urban couples' struggles to cope with the rapidly rising cost of living and education in many Chinese cities as it is of draconian enforcement of the policy.

Likewise, lifting the retirement age by five years will only partly delay the inevitable, and in the meantime it will meet stiff opposition from an important constituency of professionals, including many civil servants. In adjusting the retirement age, the government also risks aggravating an employment crisis among the rapidly growing population of unemployed college graduates in cities, many of whom are looking to filter into the employment ladder as elderly workers exit the workforce. In this context, the Communist Party must weigh policy adjustments carefully -- any change it makes in one area is likely to create new tensions elsewhere in the workforce.

The crux of China's demographic challenge lies in the fact that, unlike Japan, South Korea, the United States and Western European countries, China's population will grow old before the majority of it is anywhere near middle-income status, let alone rich. This is historically unprecedented, and its implications are made all the more unpredictable by its coinciding with the Chinese economy's forced shift away from an economic model grounded in the exploitation of inexhaustibly cheap labor toward one in which young Chinese will be expected to sustain the country's economic life as workers and as consumers. A temporary reprieve from the demographic crisis will be difficult but possible with reform, but a long-term solution is far out of reach.

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Centre wants new route along Indo-China border

Gangtok, Feb 1: In a bid to effectively safeguard the frontiers bordering China, the Centre has asked the Supreme Court for permission to construct a new 139 km-long road for carrying out operational preparedness and maintaining troops deployed along the Indo-China border in Sikkim.

In an application before the SC, the defence ministry submitted that the proposed road was essential from the defence point of view as the existing National Highway 31A was the only road connecting Sikkim to the rest of the country, Mail Today reported.

A clearance from the forest bench of the SC was required because a stretch of about 33km of the road is to pass through the Neora Valley National Park and the Pangolakha Wild Life Sanctuary in the east district of Sikkim.

The Supreme Court has been approached as the road to the Indo-China border will need clearing up of some forest areas.

The Flag Hill-Log Bridge- Madhubala Dokala road to be built by the Border Roads Organisation would pass through the sanctuary, where construction could be undertaken only after prior clearance from the SC as per its earlier orders.

Stressing on the importance of the road, the defence ministry said: "The construction of the road will facilitate building up of infrastructure in border areas for repulsing enemy incursions as well as to carry out combat operations."

The ministry said the decision to construct the road was taken after the special group known as China Study Group carried out a review of the international border with China and recommended "high operational preparedness".

One of the recommendations was laying down a communication network of roads to ensure faster mobility and operational preparedness, it added.

On the need for a road in addition to the NH 31A running through Chalsa-Khuniamore- Jaldhaka-Thode-Tangta-Rachela- Aritar, the ministry said the road would provide a "shorter avenue of approach" to reach East Sikkim and reduce the time required for troop deployment.

"The construction of this road would provide an alternative axis to East Sikkim enhancing the operational and logistic support of the troops in the area," the ministry said in the application.

The alternative access to Sikkim is crucial for the Indian Army to reach high altitude posts along the Tibet border.

The army's 33 corps based in Sukna, north Bengal covers Sikkim with division level presence in Gangtok, Binaguri and Kalimpong. It is also important for Siliguri corridor connecting north east with the rest of India

Breather for old settlers in Sikkim

reather for old settlers in Sikkim, SC stays recovery of income tax dues

New Delhi, Feb 15: The Supreme Court on Monday stayed the recovery of income tax dues from “old settlers of Indian origin” in Sikkim and sought the Union government’s response to a petition that challenged the collection of the central tax from them.

Last year, around 400 families in Sikkim refused to file income tax returns and demanded exemption that applies to those who have Sikkim Subject Certificates,The Telegraph reported.

The Chogyal had issued the Sikkim Subject Certificates (SSC) to people living in the state during 1961 under the Sikkim Subject Regulation Act of 1961. The 400 families, also known as “old settlers”, came to the State before 1975, when Sikkim merged with India, but they do not possess the certificates. The Centre had exempted SSC holders from paying income tax in 2008 after an amendment in the Finance Act by the Parliament based on the State’s request.

That year, Association of Old Settlers Of Sikkim filed a petition with a Rajya Sabha Committee saying it was discriminatory and violated Article 14 (equality before law) and 15 (prohibition against discrimination) of the Constitution.

Yesterday, senior counsel K.K. Venugopal and counsel Senthil Jagadeesan, who appeared for the Association of Old Settlers Of Sikkim, submitted that Clause 26 AAA of Section 10 of the Income Tax Act, 1961, was discriminatory and violated Articles 14 and 15 as 95 per cent of the State’s population that was exempted from paying tax “includes about 70 per cent people of Nepalese origin, and the entire exemption has come about to appease the electorate.” The remaining 5 per cent was to pay the taxes.

It was submitted that the demographic profile of Sikkim, according to the 2004 voters’ list, shows that Bhutia-Lepcha (STs) are about 20.64 per cent of the population, Nepalese constitute 69.71 per cent, Sherpas are 4.31 per cent and others make up 5.34 per cent (old settlers: 1.5 per cent and migrants: 3.84 per cent).

The petition said, discussions between Sikkim and the Union of India disclosed that SSC holders and those who became citizens in 1990-91 after the Sikkim Citizenship Amendment Order 1989 should be exempted for political reasons and to maintain ethnic peace in the state and SSC holders who had voted for the merger of Sikkim with India be rewarded by granting exemption.

“This is the reason for the differential classification whereby 95 per cent of the population in Sikkim is exempted from the Income Tax Act, 1961, while 5 per cent of the population including the old settlers of Indian origin are liable to be taxed,” a member of the association said.

Most old business community members in Gangtok have welcomed the apex court’s verdict. “We have been discriminated on the income tax issue. During the Chogyal era all Sikkimese, including the business community, came under the same tax law,” said A. Agarwal, a local businessman.

Source: JIGME N KAZI

Editorial

OLD SETTLERS IN SIKKIM

Grant IT Exemption

source: JIGME N KAZI

Now that the Supreme Court has taken a serious note of the demand of old settlers in Sikkim on income tax exemption and has even granted a stay order restraining tax authorities from recovering income tax dues from them it is time for all parties to take the matter seriously and settle it at the earliest. Locally referred to as purano byapari, many of the old settlers in Sikkim trace their origin in the former kingdom to around 1890 when Sikkim became a British Protectorate. A large section of early settlers in Sikkim from the majority Nepalese community also settled in Sikkim during this period. Rightly or wrongly, unlike the Nepalese the old settlers from the business community, many of whom are Marwaris and Biharis, were not given Sikkim Subject Certitificate mainly because they did not apply for it. India had become independent and Sikkim continued to be a protectorate of India even after the British left the subcontinent in 1947.

The Indian origin old settlers in Sikkim preferred to become ‘citizens’ of free Indian then become ‘subjects’ of the Chogyal.

Whatever be their past history it is a fact that the old settlers played a leading role in economic development of Sikkim. During the Chogyal all those who resided in Sikkim, including the purano byaparis, came under the same tax law. Even after the ‘merger’ the same system continued. It is only after the Centre decided to exempt ‘Sikkim subjects’, which include Sikkimese Nepalese, from payment of income tax in 2008 that the demand for income tax exemption for old settlers gained momentum. Chief Minister Pawan Chamling has assured old settlers that the matter would be settled amicably. Other political parties and social organizations in Sikkim also have a sympathetic view on the subject. Now the time has come to positively act on the matter.

DOCUMENT

The Sikkim Chamber of Commerce recently submitted a memorandum to the Income Tax Department on exemption of IT for old settlers in Sikkim. The full text of the memorandum is published herebelow:

The Commissioner of Income Tax,

Income Tax Department,

Government of India,

Gangtok-Sikkim

M E M O R A N D U M

Sir,

The Sikkim Chamber of Commerce welcomes you to the small peaceful and beautiful state of Sikkim. As understood by us the very reason for your visit is to understand the reasons of non compliance of Indian Income tax extended in Sikkim in the year 2008. The Sikkim Chamber of commerce on behalf of all communities in Sikkim submits the under mentioned for your kind information and necessary action please.

History of Old Settlors in Sikkim

The various communities comprising mostly of people who migrated from different parts of India have been settled in Sikkim from centuries when Sikkim was a country under the regime of Chogyal Dynasty. The then erstwhile kingdom treated all the communities equally in all aspects of life. In the year 1961, the Government of Sikkim enacted Sikkim Subject regulations Act 1961 and issued Sikkim Subject certificates to the citizens of Sikkim. The Indian citizens residing in Sikkim until April 26, 1975 chose not to obtain Sikkim Subject Certificates under the provisions of the Sikkim Subjects Regulation, 1961 as they were already citizens of India. Sikkim was a protectorate of India under the Indo-

Sikkim Treaty of 1950 under which all Indian citizens residing in Sikkim were treated at par with the Sikkimese people. There was no discrimination during the regime of the Chogyal and the Sikkim Income Tax Manual, 1948 was applicable equally to all persons residing in Sikkim until 16/06/2008 as per Circular No.2/Fin/Adm. dated 16/06/2008 issued by the Finance Department, Government of Sikkim. On 26th April 1975, Sikkim merged with India as per Article 371 (f) of the Indian constitution. The Sikkim Subject was repealed and Certificate of Identifications were issued to Sikkimese citizens and it was issued by Govt. of Sikkim. There were large number of people who were left out from becoming Indian citizen who were neither Indian nor Sikkimese, the Sikkimese Citizen having Sikkim Subject automatically became citizen of Indian, so the government through the MHA Order No.26030/36/90-IC-I dated 7/8/1990 and April 8, 1991 on the basis of MHA Order No.26030/69/88-IC-I dated 20th March 1989 with Guidelines thereto made them citizen of India and issued them Certificate of Identification. Indians were not required apply for COI as they were already Indians.

Extention of Indian Income Tax Act 1961 in Sikkim

The Indian Union extended the Income tax Act 1961 in Sikkim as per sec 10 of 26 AAA on 16/06/2008 as per Circular No.2/Fin/Adm. dated 16/06/2008 issued by the Finance Department, Govt. of India. The definition of “Sikkimese” as explained by the act deprived us of our identity and is discriminatory towards original Indians residing in Sikkim before its merger with Indian Union. As per the definition of “Sikkimese”, people who were neither Sikkimese nor Indian but made Indian vide MHA Order No.26030/36/90-IC-I dated 7/8/1990 and April 8, 1991 were exempted but at the same time the original Indians were denied of their legitimate rights.

Representations made by the communities so far and the outcomes

The various communities residing in Sikkim since pre merger era i.e. before 26th April 1975 have made several representations to different forums for inclusion of 400 families who are left out from the purview of Income tax exemption, the details are as under :

1. Petition in Rajya Sabha Petition Committee

A petition to seek equal rights and exemption of Income Tax and to safeguard the rights of bonafide Indian National Citizens residing in Sikkim before the merger is filed and accepted by the Rajya Sabha Petition Committee. The Committee was to visit Sikkim and conduct the hearing of affected citizens on 21st September 2011 but because of a massive earthquake in Sikkim on 18th September 2011 their visit was cancelled. The committee again was supposed to visit Sikkim on 16th of September 2012 for final hearing to reach upon conclusion but the visit was again cancelled due to imposition of code of conduct due to panchayat elections. The decision of the committee is still pending which is due any time from now.

2. Representation to Hon’ble Finance Minister, Govt. of India

A representation from the affected citizens were submitted to the then Honb’le Finance Minister vide letter on 14.12.2011 ( Annexure 1 ) and on hearing upon our grievances we were assured by him to look into the matter for consideration of Indian Income Tax exemption to the left out old settlers of Sikkim. The Honb’le Minister made a statement on record and assured in the Parliament on 12/12/2011 that “So far as Sikkim is concerned, I am receiving representations and some representations I have already received. I am looking into it.” ( Annex-2) when the issue was raised by the Shri. S. S. Ahluwalia, Member Rajya Sabha. As informed to us the matter is under active consideration and results awaited.

3. Representation to Hon’ble Chief Minister of Sikkim, Shri Pawan Kumar Chamling

We have submitted a memorandum to the Honb’le Chief Minister of Sikkim to grant exemption of Income tax to bonafide Indian national residing in Sikkim before 26th April 1975. The State Government acting on the memorandum took following actions

a) Acknowledging our genuine demand the state government formed a committee to study the issue and make recommendations to the government. (Please see Annex-3)

b) Passed a private memo in Assembly (Please see Annex-4).

c) Passed resolution in assembly on 26/03/2011 (Please see Annex-5)

d) Made recommendations to Govt. of India and raised the issue with Honorable Prime Minister of India and the then Hon’ble Finance Minister Shri Pranab Mukherjee. (Please see Annex-6)

e) The Chief Secretary wrote a letter on 21.01.2012 to Sri Mukesh C. Joshi, Chairman Central Board of Direct Taxes, Ministry of Finance, and Govt. of India. (Please see Annex-7)

The matter is still under consideration and no parties till date has denied to grant exemption and the deliberation on the issue is at its peak.

4. Representation to Income Tax Department, Sikkim and in Siliguri

There were memorandums submitted to various IT officials but no action or even reply has been received from their end.

5. Situation of Business Communities settled in Sikkim after post merger

The extension of Indian Income Tax has not only created havoc amongst the old Settlors but it has been very difficult for the post merger business communities to adopt the act. The Income tax manual 1948 was followed until 16/06/2008 and the post merger settlers were following it for almost 33 years. The calculations were very simple. The complexity of the taxation rules as per Income Tax Act 1961 has to be well taught to all for successful implementation of same. Moreover large numbers of businessman have already paid their taxes upto the financial year ending March, 2008 under Sikkim Income Tax manual to the Government of Sikkim. Since decades the business communities have been running their businesses in Sikkim as Hindu Undivided Family (HUF), everything is in the name of Head of the family. The assets and income actually belong to all members of the family. No tax planning has been done as it is done in other parts of the country.

Sir, in view of above facts and considering the complexities of the issues involved we request and suggest you that:

a) All matters pertaining to Central Income Tax for pre merger business communities i.e. a person residing in Sikkim prior to 26th April 1975 be kept in abeyance until the matter and demands from the affected citizens to the various

forums as stated above is resolved. The community at large is waiting for its long pending demands made to the concerned authorities and final conclusion from there end is still awaited. It is also submitted that the issue here is not related to Income Tax but is demand for their legitimate rights and to safeguard their identity.

b) For successful implementation and acceptance of Indian Income tax amongst the post merger residents of Sikkim, the Sikkim Chamber of Commerce suggests that the same should be implemented from a prospective date i.e. 01/04/2013. In the meantime proper training and guidance be provided to them by creating a conducive atmosphere and by conducting seminars and camps to educate them.

We heartily appreciate the gesture of your esteemed department for conducting such a meeting with the public to identify their problems and grievances and we expect the same gesture in future as well.

Thanking you,

With warm regards,

(Ashok Sarda)

President

Sikkim Chamber of Commerce

finance ministry is learnt to have accepted more than 150 of the 190 recommendations

The finance ministry is learnt to have accepted more than 150 of the 190 recommendations of the Standing Committee on Finance ( which also recommended exemption to old settlers of Sikkim but it is not clear whether this recommendation has been accepted or not), headed by BJP leader Yashwant Sinha. Finance Minister P Chidambaram has broadly gone with the 2010 version of the Bill, tabled in Parliament by his predecessor Pranab Mukherjee, instead of reverting to his own version of 2009. This means taxpayers might continue to enjoy exemption on maturity of some of their investments and industry could pay Minimum Alternate Tax (MAT) on book profits, instead of gross assets.(source: Businessline)

HCM Pawan Chamling in his independence address speaks for old settlers too

Resolution seeking Income tax exemption for old settlers and government employees and their descendents as left-out community already passed in Sikkim Legislative Assembly and forwarded to the Central government

DISCUSSION ON THE COMPANIES BILL IN THE RAJYA SABHA BY SHRI HISHEY LACHUNGPA, MP SIKKIM, Division No. 118

DISCUSSION ON THE COMPANIES BILL IN THE RAJYA SABHA BY

SHRI HISHEY LACHUNGPA, MP SIKKIM, Division No. 118

Sir,

          I rise to mention the serious objection which the State of Sikkim has to Section 1(ii) of the Companies Bill, 2012, extending the Act to the

whole of India and, Section 465(1) repealing the Registration of Companies (Sikkim) Act, 1961, as these grossly infringe upon the special provisions contained in Clause (k) of Article 371F of the Constitution of India, which protects all laws in force in the State of Sikkim at the time of its merger with the Union of India.

2.      The necessity of consultation with the State Government inherent under that Article, was not complied with, nor its views sought for before the Bill was introduced.

3.      Article 371F(k) reflects the solemn promises and assurances of the Union of India, when Sikkim merged by the will of the people as its 22^nd State. A repeal of a pre-merger law of Sikkim in this inconsiderate manner without the State Government even being consulted is contrary to the solemn trust placed by the people of Sikkim when joining the Indian Union.

Article 371F begins with a non-obstante clause: “Notwithstanding anything in this Constitution,- .........”

It follows that all other provisions of the constitution will   yield to Article 371F to the extent to which they conflict with the Article.

4.      In State of Sikkim vs. Surendra Prasad Sharma and Others : (1994) 5 SCC 282, the Hon’ble Supreme Court while dealing with the spirit of Article 371F has held as under:-

“23. ………… Effect must be given to the intendment of the said provision specially introduced in the Constitution to comply with the understanding on which Sikkim had agreed to merge with India. ……….”

5.      Therefore, any action by the Centre or the Parliament displacing the present circumstance shall amount to gross infraction of the overriding provisions of Article 371F.

6.      The proposed repeal of the Registration of Companies Act, 1961, Sikkim has been seriously resented to by the people and this has the potential to disrupt the peaceful ambience prevailing in the State. Sikkim is a strategic Himalayan border State with three international borders where elements inimical to the Nation are constantly making efforts to create such situation by fuelling discontent and resentment. All political parties in the State, both National and Regional, including the Ruling Party, are unanimous in their objections to it.

7.      Additionally, apart from transgressing upon the federal structure of our country, the provisions will also negate the very object of exempting the minuscule population of the “Sikkimese” under Section 10 (26AAA) of the Income Tax Act, 1961, from its purview. For these reasons the Companies Act, 1956, has neither been extended nor enforced in the State thus far.

8.      Sikkim Registration of Companies Act, 1961, was amended in 1989 to be “confined to the entries in List II (State List) of the Seventh Schedule to the Constitution of India”.

The legislative lists in the Seventh Schedule, which allocate power to the Union and States exclusively, permit any State to have Corporate Laws for intra-State operations. It follows that the Union cannot repeal Sikkim’s corporate legislation to the extent it operates within Sikkim.

All local Companies in the State have so far been functioning under the local Act. This sudden change in the regulatory and legal framework will have an overwhelming impact on the existing businesses and will stifle the nascent free enterprise in Sikkim.

Article 371F cannot be read as divorced from the historical development before the merger, and a legislation which tries to cater to local needs is not ipso facto unreasonable. In Saurabh Chaudri and Others v. Union of India and Others: (2003) 11 SCC 146, the Supreme Court has held that:

“39. …. Whereas larger interest of the country must be perceived, the lawmakers cannot shut their eyes to the local needs also. Such local needs must receive due consideration keeping in view the duties of the State contained in Articles 41 and 47 of the Constitution of India.”

9.      I, therefore, strongly propose that the bill, in the larger interest of the Nation, the State and the Sikkimese people, and in direct conflict with the spirit of Article 371F of the Constitution, be reconsidered and amended as below:

In Section 1(67) page 9, line 9:

“(ix) the Registration of Companies (Sikkim) Act, 1961;” be deleted.

In Section 465(1) page 231, lines 34 & 35:

“and the Registration of Companies (Sikkim) Act, 1961” be  deleted.

In Section 465(3) page 232, lines 47 to 50:

“(3) The mention of particular matters in sub-section (2) shall not   be held to prejudice the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal of the repealed enactments as if the Registration of Companies (Sikkim) Act, 1961 were also a Central Act.” be deleted.

I also propose that the consent of the State Government be taken into consideration.                            

Thank you,