22.50        ndian     onom
                                                            the third person (i.e. neither the vehicle owner nor
        tAx inversion                                       the insurance company)–the person who becomes
     This is a situation of tax structure. This takes place victim of an accident by the vehicle.
     when a firm bases its headquarters in a low tax             Till December 31, 2005, the premium for
     country while keeps its material operations in         the insurance was fixed by the Tariff Advisory
     the high tax countries (generally their country        Committee (an arm of the IRDA) but since then
     of origin). This way, firms cut their tax payment      it has been done away with. However, IRDA still
     liabilities. This is legal and is a method of tax      continues to fix the premium for the mandatory
     avoidance. Multinational corporations (MNCs)           third-party insurance, though the insurance
     keep doing this—several MNCs of the US-origin          companies have the freedom to decide on prices
     shifted their headquarters to the UK, during 1970s     for comprehensive cover.
     and 1980s. The countries in the world which have            The amount of compensation is largely
     very low tax regime for corporations have emerged      decided by the earning capacity of the accident
     as a very attractive loactions for the headquarters    victim.
     of big corporations. Bermuda, Virgin Islands, etc.
     are such countries (popularly known as the ‘tax           thirD wAy
                                                            An economic philosophy (better say rhetoric)
        tAylor rule                                         which propagates it is neither capitalism nor
                                                            socialism but a third (pragmatic) way.
     A rule/concept aimed establishing a relationship            The idea was popularised in the late 20th
     between the rate of inflation in an economy and in     century by some political leaders having leftist
     its aftermath the nominal interest rate announced      leanings, including bill clinton and Tony Blair.
     by the Central Bank of the country. Proposed by        Though it has been hard to pin down it was earlier
     J.B. Taylor (1948) this rule suggests that when        used to describe the economic model of Sweden.
     there is an one percent increase in the inflation
     rate, the central Bank increases nominal interest         tight money
     rate by more than one per cent. Though such a
     relationship between inflation rate and nominal        When money has become difficult to mobilise, the
     interest rate of the Central Bank is difficult to      term is used to show the ‘dear money’ when the
     establish, the concept has an academic importance.     rates of interest run comparatively on the higher
        technologicAl unemployment
                                                               till money
     Unemployment which results from the automation
     of the production activities (i.e., machines replacing The notes and coins the commercial banks keep
     men).                                                  to meet everyday cash requirements of their
                                                            customers (this is counted as part of their CRR).
        thirD-pArty insurAnce
                                                               tobin tAx
     Motor third-party insurance or third-party
     insurance is a statutory requirement under the         A prosposal of imposing small tax on all foreign
     Motor vehicle Act in India–also known as ‘act only’    exchange transactions with the obejctive to
     cover. A person purchasing a motor vehicle has to      discourage destabilising speculation and volatility
     go for this compulsory insurance which benefits        in the foreign exchange markets.