In the tax tussle between the Kunnathunadu Gram Panchayat and Veega Land Amusement Park in Kerala's Ernakulam district, (Taken for a taxing ride?, September 2004) the park owned by V Guard Industries has had the last laugh. Their legal battle began with the panchayat's rejection of an application filed by the park requesting to exempt it from the entertainment tax for a period of five years and also for compounding the tax at a nominal rate. But now, through a hastily-introduced ordinance, the Congress-led United Democratic Front Government has amended the Kerala (Local Authorities) Entertainment Tax Act 1961 enabling the park to emerge unscathed in its legal battle with the panchayat. The Amendment was passed by the Assembly and the Bill got the Governor's assent on the 12th of August. With the implementation of the new Act the panchayat will have to withdraw all the 22 cases it had filed before the Supreme Court against the park.
In 2003 too, the government had tried to exempt all the amusement parks in the state from entertainment tax, but had to withdraw in the face of stiff opposition from Kunnathunadu Panchayat; this second - and successful - attempt at diluting the entertainment tax has written off potentially huge tax revenues to the benefit of the industry.
The new Act has been implemented on the ground that the former one was 'not realistic'. The State will now implement a slab system to the entertainment industry with effect from 1999. Slabs are fixed according to the area of the park and the investment on the park. [see box]. The parking spaces and unutilised areas inside the park are exempted. (According to the website of Veega Land, it has parking space for 150 buses, 700 cars, 700 two wheelers). Accordingly Veega Land would come under slab C and it would have to pay annually entertainment tax between Rs 25-30 lakhs. Even this will become payable only from the fifth year onwards, as there is relaxation ranging from 60 per cent to 10 per cent during the first four years. The tax structure will be reviewed every three years.
Last year the panchayat had decided not to renew the working licence of the amusement park, and the very same day Veega Land managed to get a stay order issued by the secretary of Local Self-Governance Department, points out Sali Raju (Congress), who led the panchayat council as President until last month. "Of course, as per the Panchayati Raj Act, it's the local body that should decide whether licence should be issued or not. But we constantly had pressure from the top level leaders and ministers. Leaders of all political parties favour Veega Land. In this issue, there is no difference between the ruling front and the opposition."
She points out that for a low-income panchayat like Kunnathunadu, it's better to have something than nothing. "That's why we won't fight against the new Act. We have already spent Rs 3 lakhs for the legal battles against Veega Land." Her criticism about the government and the opposition is not baseless. During the discussions on the ordinance in the Assembly, the main opposition party, CPI (M) made only a feeble criticism. The party is itself linked with an amusement park, this one located on the banks of the Valapatnam river at Parassinikkadavu in Kannur district. The promoters, Malabar Pleasures (India) Pvt. Ltd., list the CPI(M)'s Kannur District secretary as a member of their board, and the other members too are senior functionaries of the party. The first phase of the project envisages an investment of Rs.25 crores. Work has already begun, despite criticism from environmentalists pointing to potential water misuse and questions from the rank and file and the fellow travellers of the party as to weather a proletarian political party should get involved in such profit-motivated, bourgeois enterprises.
Category A : Amusement parks having investment up to Rs 3 crores and having an area of 2 hectares and below.
Rs.3 to 6 lakhs
Category B: Investments above 3 crores, but below 10 crores
and having an area of above 2 hectares but below 4 hectares
Rs 10 to 15 lakhs
Category C: Investments above 10 crores, but below 20 crores
and having an area of above 4 hectares but below 6 hectares
Rs 25 to 30 lakhs
Category D: Investments above 20 crores, but below 50 crores
and having an area of above 6 hectares but below 10 hectares
Rs.50 to 60 lakhs
Category E: Investments above 50 crores,
and having an area of above 10 hectares
Rs.80 to 100 lakhs
Nor do all these crores come into the coffers of the park from the investments made by the owners within its four walls alone. Veega Land is not a charmed castle existing in a vacuum; it needs every bit of the infrastructure outside, developed using public money. It takes 6 to 8 lakh litres of water a day from the nearby Kadambra river free of cost, and its consumption of electricity is charged at lower rates than normal under tourism promotion schemes. Everyone agrees that access and enjoyment of private investment should be at a price, and should also produce a profit. But this same criterion is not applied to the private use of public investment! Giving up what legitimately belongs to the public - by changing the law to favour private interests - is also probably not what the voters expected, but as in most legislation there was little opportunity for citizen input in this case too.
In the media itself, attention to this dilution of tax liabilities has hardly merited a mention. The entertainment industry is a big advertising source, and the silence of the media is therefore telling.