Daily Current Affairs : 8th & 9th January 2021

Daily Current Affairs for UPSC CSE

Topics Covered

  1. Digital Tax
  2. 25th Amendment of the US Constitution
  3. GDP growth
  4. Spectrum Auction
  5. South Asia Multilateral meet
  6. City Cluster Project
  7. Facts for Prelims

1 . Digital Tax


Context : According to the USTR findings of its “Section 301” investigations into the digital taxes digital services taxes adopted by India, Italy and Turkey discriminate against U.S. companies and are inconsistent with international tax principles, paving the way for potential retaliatory tariffs.

About Section 301 of the Trade Act of 1974

  • Section 301 of the Trade Act of 1974 (19 U.S.C. §2411) grants the Office of the United States Trade Representative (USTR) a range of responsibilities and authorities to investigate and take action to enforce U.S. rights under trade agreements and respond to certain foreign trade practices.
  • Current probes are among several still open USTR Section 301 investigations that could lead to tariffs before President Donald Trump leaves office or early in the administration of President-elect Joe Biden.

Details of the new report

  • USTR has concluded the digital taxes imposed by France, India, Italy and Turkey discriminate against big U.S. tech firms, such as Google, Facebook, Apple and Amazon.com.
  • In the latest report, the USTR also said the Indian, Italian and Turkish taxes were “unreasonable” because they are “inconsistent with principles of international taxation, including due to its application to revenue rather than income, extraterritorial application, and failure to provide tax certainty.

India’s Argument

  • According to India 2% equalisation levy does not discriminate against U.S. companies as it applies equally to all non-resident e-commerce operators irrespective of their country of residence,
  • Purpose of the levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations.
  • It also does not have extraterritorial application as it applies only on the revenue generated from India, the ministry said.

Background

  • Equalisation Levy was introduced in India in 2016, with the intention of taxing the digital transactions
  • EL was levied in 2016 on services in the nature of online advertisement/digital space provided by non-resident vendors to Indian resident customers. The EL was fixed at 6 percent and the Indian customer was required to deduct this at source and deposit with the government.
  • Through amendment in 2020 it expanded the scope to include other revenue streams of non-residents; the levy is at 2 percent for these new sources.

Equalisation Levy on Ecommerce Operator

  • In the 2020-21 Budget, the Government widened the ambit of the levy by including non resident e-commerce companies as well as non resident companies earning revenue from data collected of person residing in India or using IP address located in India.
  • The applicable tax rate is two per cent (plus a surcharge) on amount of consideration received/receivable by an e-commerce operator.
  • It came into effect from April 1. The deadline for payment of the first installment for April-June is July 7.
  • The tax would be levied on consideration received by e-commerce operators from online supply of goods or services.
  • The levy is seen aimed at taxing foreign companies which have a significant local client base in India but were billing them through their offshore units, effectively escaping the country’s tax system.

2 . 25th Amendment of the US Constitution


Context : In the immediate aftermath of Donald Trump supporters storming the US Capitol building, which houses both the US Senate as well as the House of Representatives, there are calls by many to either impeach President Trump or invoke the 25th Amendment.

What is the 25th Amendment of the US Constitution?

  • This amendment lays out how a US president and vice president may be succeeded or replaced.
  • Twenty-fifth Amendment was an effort to resolve some of the continuing issues revolving about the office of the President; that is, what happens upon the death, removal, or resignation of the President and what is the course to follow if for some reason the President becomes disabled to such a degree that he cannot fulfill his responsibilities.”
  • The amendment has four sections.
    • First section codified the traditionally observed process of succession in the event of the death of the president—that the vice president would succeed to the office—it also introduced a change regarding the ascent of the vice president to president should the latter resign from office. In the event of resignation, the vice president would assume the title and position of president—not acting president—effectively prohibiting the departing president from returning to office,” states Britannica.
    • The second section of the amendment addresses vacancies in the office of the vice president.
    • The third section of the amendment set forth the formal process for determining the capacity of the president to discharge the powers and duties of office. If the president is able to declare his/her inability, then the vice president takes over as the acting president.
    • In case the president is unable to declare his/her incompetence, the fourth section of the amendment requires the vice president and the cabinet to jointly ascertain this and if they do so, then the vice president immediately assumes the position of acting president. It is this fourth section of the 25th Amendment that many are asking Vice President Pence to invoke against President Trump.

When was it introduced and has it been used in the past?

  • In the aftermath of the assassination of President John F. Kennedy, the 25th Amendment was proposed by Congress on July 6, 1965, and ratified by the states on February 10, 1967.
  • According to Cornell Law School, “The Watergate scandal of the 1970s saw the application of these procedures, first when Gerald Ford replaced Spiro Agnew as Vice President, then when he replaced Richard Nixon as President, and then when Nelson Rockefeller filled the resulting vacancy to become the Vice President.”
  • However, the fourth section of the 25th Amendment has never been invoked.

3 . GDP Growth


Context : India’s real GDP (Gross Domestic Product) is estimated to contract by 7.7% in 2020-21, with GVA (Gross Valued added) shrinking by 7.2%, advance estimates released by the National Statistical Office

Details of the Estimates

  • India’s economy had expanded 4.2% in 2019-20, but entered a recessionary phase with two successive quarters of sharp contraction triggered by the COVID-19 lockdowns.
  • Following a 23.9% collapse in the economy in the April-June period, the GDP shrank by 7.5% in the second quarter — leading to a real GDP contraction of 15.7% in the first half of 2020-21.
  • The economy will surface in the second half to record near-zero growth, or a mere 0.1% contraction, the estimates suggest.

Sector wise Growth

  • Just two sectors are estimated to record positive growth in GVA, with agriculture continuing its strong run through the first half of the year into the second half (3.4%) and electricity, gas, water supply and other utility services posting (2.7%).
  • The sharpest decline in the pandemic-dented year is expected in trade, hotels, transport, communication and services related to broadcasting (-21.4%), followed by construction (-12.6%), mining and quarrying (-12.4%) and manufacturing (-9.4%). Public administration, defence and other services are also projected to contract by 3.7%, while financial, real estate and professional services shall record a marginal 0.8% decline year-on-year, as per the advanced estimates.

4 . Spectrum Auction


Context : The Department of Telecommunications (DoT) said on Wednesday (January 6) that auctions for 4G spectrum in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz bands will begin from March 1. Licence holders have until February 5 to submit their applications.

What are spectrum auctions?

  • Devices such as cellphones and wireline telephones require signals to connect from one end to another. These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
  • The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves. With the expansion in the number of cellphone, wireline telephone and internet users, the need to provide more space for the signals arises from time to time.
  • To sell these assets to companies willing to set up the required infrastructure to transport these waves from one end to another, the central government through the DoT auctions these airwaves from time to time.
  • These airwaves are called spectrum, which is subdivided into bands which have varying frequencies.
  • All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.

Why is spectrum being auctioned now?

  • The last spectrum auctions were held in 2016, when the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore. Although the government managed to sell only 965 MHz – or about 40 per cent of the spectrum that was put up for sale – and the total value of bids received was just Rs 65,789 crore, the need for a new spectrum auction has arisen because the validity of the airwaves bought by companies is set to expire in 2021.
  • In the spectrum auctions scheduled to begin on March 1, the government plans to sell spectrum for 4G in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz frequency bands. The reserve price of all these bands together has been fixed at Rs 3.92 lakh crore. Depending on the demand from various companies, the price of the airwaves may go higher, but cannot go below the reserve price.

5 . South Asia Multilateral meet


Context : China held its third multilateral dialogue with countries from South Asia to take forward closer cooperation on fighting COVID-19 and coordinating their economic agendas, reflecting a new approach in Beijing’s outreach to the region.

About the third Dialogue

  • The third dialogue, held virtually on January 6, brought together every country in the region barring India, Bhutan and the Maldives, and was aimed at “anti-epidemic cooperation and poverty reduction cooperation
  • The first such meeting was convened by China in July, and was attended by Pakistan, Nepal and Afghanistan. This was followed by a grouping in November attended by China, Pakistan, Nepal, Sri Lanka and Bangladesh.
  • The January 6 meeting was attended by all five countries that have taken part in these dialogues — Pakistan, Nepal, Afghanistan, Sri Lanka and Bangladesh — and was a follow-up to the two earlier meetings. All three dialogues have been attended by Pakistan and Nepal.

Details of the Meeting

  • In third dialogue the representatives shared their experience on anti-epidemic and poverty relief. They talked about dealing with the impact of the pandemic, resuming economic and trade cooperation, dealing with non-traditional security challenges and advancing sustainable development, and reached an initial consensus.
  • In the previous two rounds, the countries also discussed how to work more closely together under China’s Belt and Road Initiative to boost their post-COVID-19 economic recovery and agreed that countries linked by land ports should establish joint response mechanisms in border areas, apart from committing to greater information sharing and international cooperation.

CPEC extension

  • In the quadrilateral dialogue with Afghanistan, Nepal and Pakistan, China expressed its intentions of extending the China-Pakistan Economic Corridor (CPEC) to Afghanistan and also talked about grand plans of taking forward an economic corridor with Nepal, called the Trans-Himalayan Multi-dimensional Connectivity Network.
  • The Chinese official expressed intentions of using the geographical proximity of the four countries which were connected by mountains and rivers, and also offered to share China’s expertise and capacities on COVID-19 vaccines.

6 . City Cluster Project


Context : The Centre launched the Hyderabad iteration of its city cluster project to create a platform to bring together academia, R&D labs, industry and government to tackle challenges facing the city.

Background

  • The Centre has identified six cities — Bhubaneswar, Chandigarh, Jodhpur, Pune, Ahmedabad and Hyderabad — for development as City Knowledge and Innovation Clusters.

About the Project

  • Clusters are being planned to provide a connect between the existing research and knowledge at an institution and various industries that exist in the city or state.
  • The project is being spearheaded by the office of the Principal Scientific Advisor (PSA) on a priority basis under its agenda for the first 100 days of the NDA government’s second term.

Details of the Project

  • There is a huge amount of knowledge and fiscal resources, which exist within a city or region. If we can seamlessly connect these independent entities into a virtual platform, it will help to optimise the resources, and various sectors will be able to work in partnership instead of in silos
  • “For instance, if a particular industry has a problem that needs to be solved, which can be done by scientists or maybe even an instrument that one of the R&D labs have, today there is no access or even knowledge of the existence of this equipment or technical solution. The idea is to bring all of this together
  • For this purpose, each city cluster will have a nodal office headed by a CEO, who will be selected by the stakeholders. “This could be an industrialist or a scientist or an academic. Anyone that the stakeholders think is an appropriate appointment. Government officials, such as municipal commissioners, will be a part of the city cluster.
  • Project will assist industries in gaining access to existing technology, and help academic institutions and R&D facilities commercialise this technology.
  • The nodal offices will be run and funded by the PSA’s office for the first three years, within which time the stakeholders will have to look at how to make the initiative independent of government funding and sustainable.

7 . Facts for Prelims


Institutions of Eminence (IoEs)

  • UGC has amended its regulations, allowing Institutions of Eminence (IoEs) to set up campuses abroad after receiving no objection certificates from the Ministry of External Affairs and Ministry of Home Affairs. The move is in line with the government’s new National Education Policy, which says that high performing universities should be encouraged to set up campuses abroad.
  • The amendments also permit the IOEs to start new off campus centres, with a maximum of three in five years and not more than one in an academic year.
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