New Delhi, Jan 9 Just a day after industry captains pitched for an across-the-board reduction in personal tax rates and other taxes, top economists had some other advice for the finance minister.
In a pre-Budget meeting with finance minister P Chidambaram on Wednesday, economists seemed divided on the sensitive issue of reducing taxes. While many advised the minister to keep the rates unchanged, a section was for lowering taxes on the back of a buoyant revenue collection.
“Given the circumstances that there are a number of fiscal stress points in the offing—like oil bonds, market stabilisation scheme bonds, pay commission—it is not prudent to start thinking of reducing tax rates,” Standard & Poor’s chief economist for Asia-Pacific Subir Gokaran said after the meeting.
The economists said increased collections should not be taken as permanent since the government had big-ticket spending coming up, such as pay hikes to over 30 lakh government employees when the Pay Commission submitted its report in April 2008. However, Gokarn said there was no consensus on the issue as some were in favour of reduction in rates as tax collections have shown impressive growth. Personal tax collections have risen 50% to Rs 2,05,000 crore during April-December 2007 period while corporate tax collections have increased 40%.
Hopes for a cut in personal taxes have increased after the FM said last week that there could be “a case for moderation” of tax rates if voluntary compliance increased.
Other economists said the government should use the rise in mop-up to develop infrastructure. “If you have buoyancy in tax revenue, it should be used to increase infrastructure spending or rationalise indirect taxes,” said Rajiv Kumar, director & chief executive of the Indian Council For Research on International Economic Relations (Icrier).
Kumar also suggested rationalisation of high excise duties, particularly in the oil sector. “You can also look at the tax composition of oil prices, it is 57%. Why don’t you bring that down? By cutting taxes you can give relief to customers and downstream oil Companies,” he said. But Gokaran was for not touching excise taxes on the oil sector as well since it would have serious revenue implications. He advised moving to specific duties instead of ad valorem.
With rupee appreciation already making imports cheaper, Kumar suggested that customs duty rates should also be left untouched. He called for imposition of tobin tax on foreign inflows to check rupee appreciation.
In a pre-Budget meeting with finance minister P Chidambaram on Wednesday, economists seemed divided on the sensitive issue of reducing taxes. While many advised the minister to keep the rates unchanged, a section was for lowering taxes on the back of a buoyant revenue collection.
“Given the circumstances that there are a number of fiscal stress points in the offing—like oil bonds, market stabilisation scheme bonds, pay commission—it is not prudent to start thinking of reducing tax rates,” Standard & Poor’s chief economist for Asia-Pacific Subir Gokaran said after the meeting.
The economists said increased collections should not be taken as permanent since the government had big-ticket spending coming up, such as pay hikes to over 30 lakh government employees when the Pay Commission submitted its report in April 2008. However, Gokarn said there was no consensus on the issue as some were in favour of reduction in rates as tax collections have shown impressive growth. Personal tax collections have risen 50% to Rs 2,05,000 crore during April-December 2007 period while corporate tax collections have increased 40%.
Hopes for a cut in personal taxes have increased after the FM said last week that there could be “a case for moderation” of tax rates if voluntary compliance increased.
Other economists said the government should use the rise in mop-up to develop infrastructure. “If you have buoyancy in tax revenue, it should be used to increase infrastructure spending or rationalise indirect taxes,” said Rajiv Kumar, director & chief executive of the Indian Council For Research on International Economic Relations (Icrier).
Kumar also suggested rationalisation of high excise duties, particularly in the oil sector. “You can also look at the tax composition of oil prices, it is 57%. Why don’t you bring that down? By cutting taxes you can give relief to customers and downstream oil Companies,” he said. But Gokaran was for not touching excise taxes on the oil sector as well since it would have serious revenue implications. He advised moving to specific duties instead of ad valorem.
With rupee appreciation already making imports cheaper, Kumar suggested that customs duty rates should also be left untouched. He called for imposition of tobin tax on foreign inflows to check rupee appreciation.
No comments:
Post a Comment