C.A. Vision 2000

 Notes :

1. Ninth paragraph is specifically about the Institute.  However, the role of the Institute is discussed throughout the paper.  Wherever relevant, the words "Institute" or "ICAI" are high lighted.
2. Throughout the article, attempts are made to give examples and lead to a concept.  On a first reading, the two may look totally unrelated like "Internet" and "Democracy". 

1. Preface :

1.1 I am glad that I have been requested me to talk about future.

For two reasons :

(i) It is a sure and  solid  sign of  progress.   We are futuristic and we want to plan about future.
 

(ii) If I talk on Income-tax, and if I make a mistake, there will be several members who will catch me for my mistake.  If I talk about the year 2000, who can tell me today whether I will be right or wrong!  And in the next millennium  all of us would have forgotten 23rd February, 1997.

You might have noticed the tendency of astrologers and palmists.  They are more comfortable telling your future rather than telling the present or the past.

You can let your imagination run riot - for future.  Not so for past or present.

1.2 When a person talks about something; he may want to give an impression; and/or the listeners may carry an impression that:

"The speaker has an expert knowledge on the subject;

"All the actions criticised by the speaker are never done by the speaker;

"All the actions praised by the speaker are sincerely followed by him".

I very humbly submit that I am only a learner of the subject I am presenting herewith; and I have only begun to walk on a path that I am discussing.  There are still, miles to go.  I am only presenting a few thoughts and a few dreams and if you consider these worth your consideration and probable action; I would have made my humble contribution.

1.3 There is a substantial difference between Astrology and Futurology.

In astrology, the astrologer is trying to predict the future based on the stars' and the planets' conjunction at the time of his customer's birth.

In futurology, one is trying to understand history and philosophy.  Study the present geography, economics, culture etc.  Look at the technological and other developments taking place.  Consider all these, and more factors and try to project future events.  Then be prepared for the future.  Develop your skills, garner your resources and reserves and win the future.
 

In astrology as well as futurology - Both - there is a 90%  chance of your going wrong.

And yet there is an excitement, fun and expectation in both.  That is what an evening talk is supposed to have.
 

2. Background

Before going to the exciting and prosperous future, let us see the reasons of gloomy present and how to come out of it.

I will broadly cover some topics.

The future of the Institute of Chartered Accountants (Institute) as a whole.

The future of C.A. as an individual.

This will necessarily make us look at Indian economy as a whole, and its globalisation.

Which of course will bring us to the present developments taking place in India and abroad.

I dare not say what will be the future.  But I will share with you some of my thoughts and dreams about the future.  Let us consider these, act on some of the thoughts and probably we can make the future the way we are dreaming - at least some part of it.
 

3. A way of looking at the life

Young college going boys read detective novels to get the excitement and the thrill.  As they grow, they start reading novels with complex plots and sub-plots.  Or see the soap operas which go on for ever.

Reading newspapers can be equally exciting and thrilling - if you acquire a method of reading.  Some people read a day's paper, may be comment on it and then throw away the paper.  Even before the week ends, the news are wiped out from the mind.

Try this different method.

Read the news and try to connect with the past.  For example, Jaylalitha.  She is facing the rough music.  Remember, how, just two years back she was ruling the Tamil Scene.  In fact she was one of the few chief ministers who could aggressively confront Prime Minister Narsimha Rao.  From what heights of power and arrogance she has fallen to what depths of shame and ridicule !  Go from one sub-plot to other sub-plots.  Narsimha Rao, Schindia, Sukhram, Chandra Swami and so on.

From the Political plot, move on to the corporate and financial plot.

Shaw Wallace, M. S. Shoes (with a C.A. as the Chairman), Pillai's (of Brittania) death in the prison, now ITC and in future - who may not be there in the "hall of shame" !

Even more shocking was the securities scam of 1992.  All the reputed, respected financial institutions and professionals were there in the news paper headlines.  Not one institution claiming high morals was left out.  The Joint Parliamentary Committee ensured that all these people remained in the public eye for a period longer than any soap opera on the television.

Now look at all the plots together.

Why is it that all this is suddenly happening ?

Is it happening only in India ?

Or are similar things happening world wide ?

Well, the campaign started by the Italian magistrates against politicians and mafia had seen the turn of the Italian Government.  Japanese Prime Ministers in a row had to resign and the LDP which had a continuous rule for  over 50 years lost elections for the first time in the current decade.  The Korean Prime Minister is punished for 17 years imprisonment.

What is happening ?

In my view, God (or nature according to your own personal beliefs)  is hanging all the bigwings on the tenterhooks.  They are still alive.  But they are struggling for their life.  They never imagined that for doing their fraudulent and corrupt practices, someone, some day will punish them, expose them.

God is bringing up the crooks one after the other and telling us all - "Behave yourself.  Nothing prevents me from hanging you by the collar of your shirt on the next tenterhook ".

We in India have sunk to the abysmal depth of corruption and degradation.  Fear of God or punishment in hell is not deterrent enough.  God has decided that we need flogging in the public to remind us of our morals.

In politics, a Yadavasthali has started.  It may end only when all corrupt people are destroyed.

I hope and project that chartered accountants will be honest and clean.  When a C.A. signs an audit report he will do his conscientious job which he is supposed to do as per the code of conduct and as per the law of the land.  He will not give any illegal or immoral advice and will not resort to dubious practices.

When we look at life at macro level, - over broad time and geographical frames ; we can see patterns emerging - which can give messages - not readable in individual events.
 

4. Present Recession

For the current recession, our huge greed is one of the reason.  One broker came and said that the Mazda Leasing share of Rs.10 is worth Rs.100 - 500 - 1000 and ultimately Rs.1,600/-.  We chartered accountants knew that he was buying speculative profits into Mazda, showing higher net worth, then projecting huge future, applying all the theories of ratios and charts with a bogus base.

For other companies in which he speculated - probably we did not have details with such clarity.  But we all wanted to believe and hence believed that even for a new industry, a ten rupee share can open at Rs.40 or even Rs.100.  In this belief, we had forgotten our accountant's knowledge, we were flying in the sky.

Every person who has bought shares on Harshad Mehta's advice or tip or trend - is guilty of being greedy.  God has made fun of him.  God has shown him that the common man is not different from the politician or the businessman.  He has acted in a greedy manner to the extent he has powers and resources.

God is telling us - "wake up, you lazy Indians ! Fight for your right to a clean and honest India. I have told you through N.A. Palkhivala and now through many others that "The price of Independence is continuous vigilance."
 
I sincerely hope,chartered accountants will have the deep sense of understanding what is right and what is wrong;  and will not be swayed by the waves of pure nonsensical actions - which have come repeatedly in the past and which will keep coming in the future. We  will be vigilant and will fight to make this country a better place for living and prospering.

A Chartered Accountant should be like a rock of pure knowledge and ethics with great degree of patience, understanding of human psychology and philosophy.

He should be able to slow down his clients, friends and relatives in the times of madness such as seen in 1991-92; and he should be able to comfort them in the recessionary times like the present.

Greedy expectations of unrealistic profits ; non-fulfilment of these expectations ; and resultant frustrations have caused this recession. Unless the promoters and merchant bankers stop arousing such expectations ; and investors stop having such expectations ; the market will not attain a maturity.

At a different level, the causes for several problems of Indian Society may be looked at in a different light.

I am convinced that if India has sufferred one tragedy after the other from Ayodhya kand to Bomb blast to recession - Indians have invited these by being corrupt, by loosing sight of our cultural values, and being insensitive to the poor.

I am told  that current college going  generation does not respect Gandhiji.  Well, then it is a sure sign of decline and destruction.

5. The Future

Amongst all this chaos, I am optimist.

If we make a basic assumption that a large majority of Indians will be honest, responsible citizens caring for this nation ; then let us proceed and see the potential lying before us in the next five years.
 
If we had to talk about the year 2025, I would have said, we can be on the top of the world. However, in the year 2001, we will be working to get on the top of the world. So let us try
to say how we will reach there - and what are the reasons of my optimism.

India is a large market and a growing market. It has insatiable demand and by the fundamental forces of economics, India can not have a recession for the next ten to fifteen years.

Reasons why our share market is in the dumps, liquidity crisis is hampering the industrial growth etc. - are all man made problems.

Greed, short sightedness and ignorance about free market economic forces-shared by our top politicians, industrialists and many of the professionals is the cause of these problems.

Man made problems can be solved. I had made a presentation in December - on how to - "reduce fiscal deficit, wipe out budgetary deficit, lift the share market and the economy and all these without any inflation. In fact, the prices can go down. The value of rupee can go up."

However, today I will not talk on these economic hypotheses. Today I am only expressing a fond hope that we will have more and more chartered accountants across the country who will be applying their minds on solving India's economic problems.  One of the fundamental problem and the method of addressing such problem may be seen here.

World over, Governments are greedy. They want more taxes and more powers. In some countries, there are professionals who study the entire budget and other proposals by the Government. They shred the budgets to pieces and if there is any intellectual dishonesty, the finance minister will have a lot of people to answer to. In fact, Ministers think ten times before they make a proposal.

In India, very few people travel beyond the finance minister's speech. We, tax professionals read the tax proposals. And that is the end of it. Nobody reads the full budget - which is a store house of economic data - worth more than 1000 pages - which is presented at the Parliament. Most "experts" give comments on the budget - on the same day of presentation. I do not understand, how one can give an "expert" comment without reading the budget !
 

We (ICAI) need Economists' committees at each region and at Delhi. These committees should make an indepth study and give constructive analysis to the nation and to the public. Our communication to the public should be so meaningful and powerful that finance ministers will seek our opinions on these matters also (in addition to tax matters).

This can be our Institute's additional responsibility to the nation.

Let us see our professional opportunities.
 

6.  Opportunities for Practice :

An entirely new kaleidoscope of opportunities is opening up before our eyes. Rich fortunes lie before anybody who is prepared to work hard enough to master these opportunities.

Let us look at our present practices and project the future.

6.1 Core Practices
 

6.1.1 Audit. For long, audit has been considered a labour job. Liabilities and responsibilities are onerous and remuneration inadequate.

Balance sheet audit with computers will be less labourious.

If companies are educated well enough to write detailed accounts with full narration, then all branches', depos', factories' accounts can be centralised at the head office. Substantial amount of scrutiny and analysis can be done at the head office ; leaving only test audit - voucher verification on site.

If an Ahmedabad depo and Bhiwandi factory can be audited sitting at Bombay ; a Spanish factory, a New York sales branch owned by a Japanese company can be audited by a Bombay Chartered Accountant.

We can have associations with large audit firms internationally and can export our services sitting in India.

Audit will be our core practice giving contacts and causes for several related practices. Because it is a monopoly practice, it will remain a least paying practice in the entire kaleidoscope. Tax audit and certification work will remain the dirty - cheap work.

6.1.2 Taxation. Indian tax system has become fairly straight forward and simple.

When the tax rates were usurious, the practice was dirty.

Now our rates are reasonable rates compared to the industrialised countries of the world. The practice will become cleaner and better.

At the same time a lot of practice - which was dependent upon small income returns, settlement practice ; etc. may go down considerably. Some chartered accountants may feel the loss of income.

And yet new and exciting fronts are opening up on the side of international taxation and double tax avoidance agreements. We already have several chartered accountants who understand the Mauritian law better than the Mauritian chartered accountants.

Yet, we have many more miles to go.

Today, London is an international financial centre and British chartered accountants advise on international tax issues. I project that by the year 2001, we will have at least 5 chartered accountants and 5 lawyers in Bombay alone who will be advising on world wide tax issues.  And there will be many more who will be prectising on international taxation. This is not a pipe-dream. We have started a series of seminars on this subject and all the three professional institutions of Bombay - (WIRC, BCAS and CITC) together can achieve a great deal in this matter.

6.2 Non - Core Practices.

Excise and other indirect taxes ;

FERA and related practices ;

Project report preparations, presentations ;

Public issue advising - Merchant Banking ;

Shares analysis and investment advising ;

- These are the areas which have already interested chartered accountants and by the year 2001 ; we should have great expertise in all these fields.

New fields which can open up for us -

Advising in the areas of private banking, foreign exchange risk management, foreign collaborations - negotiating and drafting the agreements are some of the areas already in our site.

In 5 years, I envisage FERA to be scrapped. There will be far more two way international business.

Foreign exchange - can be mind boggling.

An Indian-multinational company may be having branches in six countries, subsidiaries in ten countries doing business with the world.  When a German branch/factory sells goods to an Australian sales depo; converting that transaction in Indian rupee as per Accounting Standard 11 is going to be quite an interesting affair.

6.3 We will need hundreds of country-specialists.

There should be at least one hundred India - specialists. C.A.s who are experts in the Indian economy, the business culture, the commercial law and Indian tax systems. These people can be very essential business/management consultants to foreigners investing in India as well as progressive Indian Industrialists taking strategic decisions in India.

At the same time, I expect C.A.s - specialising in different countries like - Japan, China, Singapore, Indonesia, Europe, U.S.A., Latin America and so on. These people will have mastery over double tax agreements - with relevant countries. And may have associates in these countries. The Indian C.A. can not give expert, final advices for a foreign country. However, they can certainly give a lot of preliminary information to their Indian clients investing/exporting in those countries.

Then there will be specialists in WTO and such other international organisations.

In short, practice based on massive knowledge is just opening up before our eyes. The institute has to grab this historic opportunity and train thousands of members in all these new areas.

I am sure we are doing a great deal and we will continue to do even greater.

Future should be bright for the honest, intelligent C.A. and should be tough for the dishonest/average C.A.
 

7. Education. Preparing for Globalisation :

7.1 Our education system is bad.  Our colleges, produce clerks, not accountants or scientists.  However, isn't there something lacking even in the C.A. Syllabus ?  Do we prepare articled assistants to meet the future challenges ?  Does the entire training system need changes ?  When I had a discussion with a council member on this subject, he said, "we are bound by Government controls.  We can not change the syllabus without Government approval.  And it takes five years to get approval for small changes also."

If this position is true even today, I would like to give an example to define democracy.

7.2 Democracy and Co-operative Housing Society

Imagine A Co-operative Housing Society called "INDIA CHS" Ltd.

One member, Mr. A wants to repaint his house.

The chairman and the secretary of the society send him a notice asking him not to proceed with painting without society's prior permission.

The manager goes further and advises Mr. A that "pink" colour will not be suitable. Mr. A must go for "green" colour.

Courageous Mr. A will thunder -

"Who are you to restrain me or advise me about my home painting?  You have no right whatsoever.  I, and other members have elected you and made you the Chairman and Secretary to pay the common bill and to manage the sweepers of the society.  I have not given you the right to rule over me."

"The manager of course is a servant of all the members.  He has no locus-standi to go beyond serving the members".

This would be a micro level example of democracy functioning.

Macro level functioning of democracy in India would be -

"To tell the politician that we have elected him to look after defense and law and order.  We have not given him the rights to impose on us, the licensing and FERA and all the redundant laws.  And the bureaucrat is the public servant.  He has no locus-standi to do anything except serve the public."

And when we apply this principle to ICAI, we have to say that-

ICAI is a mature, large enough autonomous body.  It knows fully well what is good for its members - present and future.  It is not going to accept instructions about syllabus from any statutory authority.

I do wish, our council will strongly fight the Government interference in our affairs and we will produce C.A.s capable to take on the global competition head-on.
 

8. C.A.'s Office of the future

Offices in Bombay are going to be smaller and smaller.  New and old chartered accountants can not afford the size of office that they want.

Contracting out services, innovative furniture designs to accommodate maximum people in the same area, throwing out books and having data storage on computers  and CDs; are some of the ways.  Office is our costliest investment in fixed assets.  To make better capacity utilisation, you can consider running the offices in two shifts - say, 7.00 a.m. to 2.00 p.m. and 2.00 p.m. to 9.00 p.m.

Future offices are going to be more and more efficient.

Internet and availability of knowledge through internet can be one exciting medium.

I do hope that ALL the regional offices And ALL the branches of the Institute would install a 586 computer, obtain Internet connection and make it available to the members and the articled assistants.  Popularise the concept through work shops and seminars.  Make it available to students - free of charge and to members "at cost" basis.

We, as the institute should be masters of this tool called Computerised-Telecommunication.  We can not afford to lag  behind.

Just as typewriters, fax, xerox machines and computers have become part of our office, computerised telecommunication has to be part of our office.  No more importance.  No less.
 

9. Institute's Role in :

9.1 Globalising our Practice : Reciprocal Recognition.
 
Foreign Firms are not able to practice in India.
 

• But the restriction is only for audit.

All the big and many smaller accountancy firms want to practice in India.

We are interested in maintaining the high standards of ethics and professional code of conduct.

I do hope, sooner or later, the ICAI will be able to enter into agreements with sister institutes of several important countries and agree on several issues. Then foreigners will be able to practice in India.  Then only, we will be able to practice abroad.

We have to learn the international practices and he able to conquer the world practice.

ICAI must be one of the largest institutes in the world. If we raise a campaign of internationalising our practice, very soon, we will be providing hundreds of faculty members in conferences around the world ; and hundreds of C.A.s advising in several matters - world over.

9.2 Tax laws will have to be simpler and simpler.

Income-tax Act requires computation of Income, preparation of Profit & Loss Account and then hundred complex concepts emerge.  No one has the time for these complexities.  We need simplification.

Presumptive taxation is one simplification - but it does not go far.

When it comes to international tax, scrutinsing the accounts of a foreign company - is one task that everyone wants to avoid. Most DTAs and even domestic laws want to tax the "gross" receipts at a small rate and simplify the entire administration.

When an Indian commodities trader ; while flying from New York to Australia ; purchases a million dollar goods from China and sells it in Germany ;

Which country will tax the profits ?

In what proportions ?

There will be mind-boggling new tax complications.

All the present laws and DTAs will be inadequate to deal with the business of the future. Laws will have to change. We, the C.A.s can take a pioneering role in envisaging the future, drafting the laws and treaties relevant for the future and placing these before the people of India and the statutory authorities of India.

I do hope, the ICAI will have a committee whose only job will be to look into the future.

9.3 Democracy.

Internet communication was designed for and by U.S. military.

The strategy was - one should be able to communicate throughout the world. And the communication should not be broken down just because any one or more links are broken down somewhere. It should survive even a nuclear war.

Can we have an economy - which runs on the energy of the people of India. It should continue to work irrespective of politicians. Such an economy is possible when democracy is more and regulations are less.

With more democracy comes the need for even more - self-regulation and discipline. And for this purpose all institutions should be strong, independent and well placed. It would cover ICAI, ICSI, ICWI, Medical institutions, Bar Association and so on. Importance of professional institutions is going to grow more and more.

With growing globalisation, international institutions will be more and more important and the power of domestic Governments will decline. ILO, WTO, U.N., I.M.F., Regional bloc agreements  and several international authorities will emerge.  Sovereignty of a Government will undergo qualitative change.

World as a whole body will be a functioning anarchy.

In this anarchy, that will be growing, we have to find our role.

Growth of Global economy is good.  But Global economy also means less powers to domestic Governments and More freedoms to the people.

But no one wants to relinquish powers.

We do not want to give up tax-audit and certification work. Government does not want to give up the idea of licensing international satellite communication.

Tax audit is degrading ICAI.

Licensing of satellite communication will clip the wings of a free communication concept.

Professional institutions will have to rise in their knowledge of global activities ; and be able to give constructive, progressive advice to the Government.

In the international trade and finance, Governments HAVE TO COMPETE for scarce resources.  Finance and management are the most valuable resources.  The absurd notions of "walling-in" the financial resources through FERA, and banking laws are doing immense harm to our economy.

Professionals will have to wake-up the Governments and tell them to compete for resources rather than controll resources.

ICAI should have a committee which understands global economy.  I am sure we have many members competent to do this job.
 

CONCLUSION :

This is the Information Age.

Knowledge is Power.

All other powers - physical, wealth and political power will be sub-ordinate to the power of knowledge.

All professionals have only one thing to deal in - knowledge.

We - ICAI should be (with other professionals) at the helm of the affairs of our society.

I do hope - we chartered accountants will continue to acquire the relevant knowledge and use it effectively for the benefit of the society and for our clients and for ourselves.

In the complex anarchy of global practice, we will need some solid base to guide us, to support us; to explain to us the meanings of new challenges and method of dealing with the same.

May I offer one simple suggestion - !

See B.R.Chopra's "Mahabharat" Serial.  From the very first episode to the last.  Try not to  miss anything. If you have missed Door Darshan telecast, buy/borrow the Video tapes.  For success in any walk of life, we need our roots to be strong.  We can look at Mahabharat as a philosophy and then our personal religion need not come in the way.  Mahabharat is a good guide for our home life, for domestic practice and for the global practice of the past - present and future.