French president Emmanuel Macron was greeted by thousands of protestors on the streets of Paris, acts of arson and vandalism when he returned from the G20 summit at Buenos Aires last week. The ‘Yellow Vests’ protests, broadly against the Macron government’s proposed reforms in the 2018-19 budget and, more particularly, against a hike in taxes on diesel and higher living costs that come with it, are a barometer of the pressure governments must undertake to implement reforms. The Macron government, in the case of the diesel taxes, has capitulated. The protests that have organised both middle-class and blue-collar workers and their families have parallels across the world—the election of US president Donald Trump on protectionist, anti-reform promises, and the Brexit decision of the UK are a couple of such parallels. To be sure, the anti-reform crowd has genuine grievances. An analysis by BBC and the Institut des Politques Publiques, a collaboration between the Paris School of Economics and a research arm of the French national statistics bureau, shows that Macron’s overall tax reforms hit the bottom one-fifth of households in terms of fall in disposable income the hardest while benefiting the top 1% the most. However, the fact is Macron’s taxes on diesel, against the current global warming outlook, are a sound measure. Ultimately, it boils down to governments taking a long-term view and going forward with reforms.
To lessen collateral damage in the implementation of reforms, it is critical that governments build safety nets and strengthen social security measures for those most vulnerable to such reforms. While protests against reforms are a healthy part of any democracy, the bitter pill has to be swallowed at the first instance. Else, it becomes harder to implement this even as the consequences of maintaining status quo become worse. For instance, freeing up farmers from the APMC Act and cartelised mandis would have helped address farm distress in Maharashtra, but given the protest from traders and the opposition, the Maharashtra government had to drop its plan to allow farmers to trade outside APMC mandis. Had states recognised the APMC rot earlier and moved accordingly, there would have been no pussyfooting of this kind.
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Source: Financial Express