CPM on stock market crash: We told you so

The CPI(M) today demanded that the government reintroduce a long-term capital gains tax, review the Double Taxation Avoidance Agreement (DTAA) with Mauritius and halt moves towards capital account convertibility in view of the stock market crash on Thursday.

Speaking at a discussion on the events at the stock market in the Rajya Sabha, CPI(M) politburo member Sitaram Yechury rejected Finance Minister P Chidambaram's assertion that the crash was caused by domestic reasons ("uninformed media reports about a CBDT circular") or that there was an international downslide in the stock market.

He said that the Left parties had been warning the government about the 'vulnerability' of the stock market to FIIs for a long time.

"The unprecedented fall in the stock market yesterday has once again underlined the volatile nature of the asset price boom in the country in the past two years. The bull run in the stock market has been primarily driven by the FIIs who have taken advantage of a liberal taxation regime to make enormous speculative profits," the CPI(M) said.

The party also said that media reports suggested that the US mutual fund industry had been lobbying with the Indian revenue department for some time to reduce even the existing tax burden.

Calling upon the UPA government to be vigilant against pressures from the FIIs, the Left party said that India's tax policy cannot be held hostage to the 'whims and caprices' of the FIIs and should be determined on the basis of the requirements of resource mobilisation in order to fund the social welfare programmes.

Referring to the DTAA, Yechury said that Mauritius does not have long-term capital gains tax and, therefore, there is no question of double taxation.

The government should give a 're-look' at similar agreements proposed with other countries like Singapore, he said.