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If I were the Finance Minister...

In a developing county like India , the role of the Finance Minister is a crucial one, specially when the country is going through it's worst period in recent times. A few valid suggestions for Mr Chidambaram.

At the outset I will ensure that my Budget speech will not last more than fifteen minutes - not the customary hundred minutes of my illustrious predecessors. That would compel people to read through the Budget documents analyse and then criticise me rather than instantly rating it!

The broad theme, thrust and trajectory of my economic policies for the next five years shall be to:

  • Eliminate Hunger and with it, associated malnourishment.
  • Improve business environment and instil confidence in businessmen
  • Maintain stable simple predictable tax laws
  • Improve Infrastructure
  • Reduce deficits and improve overall efficiency

Given this paradigm, now let me take you through with my proposals.

A. Direct Taxes: I will attempt to do away with Personal Taxes. In this connection:

  1. Salary Income will be brought out of the tax net but disallowed as expenditure in the hands of the Employer. Partner’s Salary Income shall be also be disallowed in hands of firms and LLPs (limited liability partnership). Self employed will have an exemption of Rs 5 lakh which will be increased substantially over the years. Income above this will be taxed at 20% flat rate of tax.
  2. Corporate to pay tax at the rate of 30%, firms and LLPs at 20%.
  3. In the alternative Corporate will be encouraged to pay 25% on MAT (Minimum Alternate Tax) basis This scheme will be offered first to listed companies, then to other companies in which public are substantially interested and then to other companies.
  4. Interest income will be exempt for deposits in bank exceeding 3 years in line with exemption to Long Term Capital Gains Tax on shares (which will be available only if held for more than three years). This will improve Indian holding in our share markets. Senior citizens shall be exempt from tax on such income out of deposits up to Rs 50 lakh.
  5. Deductions for repairs and maintenance for one house to be raised to 100%.
  6. Depreciation Rates to be uniform for all assets - at 25%.\
  7. Dividend Distribution tax to be at 20%.
  8. Education Cess to be done away with.
  9. Will work for abrogating the Indo-Mauritius DTAA.

Anti-Avoidance / Revenue raising measures:

  • S 68 of IT Act [seeking source of Income] shall not apply to a National Infrastructure Bond – an open ended tax amnesty scheme. Consequently any one with untaxed money can invest in this bond which will be redeemed at its face value at the end of five years of investment.
  • Participatory Notes shall be abolished. Existing PNs will be nationalised and given back to those who are not residents, NRI, PIO and OCBs with more than 60% Indian shareholding.
  • STT will be extended to all derivative transactions in commodities market, Forex markets and other such transactions on same rates as applicable to Stock markets.
  • A levy of 40% on tax at source will be levied on gross rental of second house, STCG in any asset, income from modelling by persons who are not professional models, lottery, profit on sale of second house and other such “unearned” incomes.
  • Chapter VI A of the Income-Tax Act to be eliminated.
  • STRs and CTRs generated by the Financial Intelligence Unit shall be used along with AIR to bring in new assessee to the tax fold. The target for IT department from these information shall substantially hiked.

Administrative measures

  1. GAAR will be introduced forthwith. Any transaction emanating or passing through a Tax Haven will be deemed to be a tax avoidance scheme and the onus shall be on the tax payer to disprove this allegation.
  2. Tax payers paying 30% incremental taxes over previous five years will be by statute exempt from the scrutiny provisions of S 143 (3), 147 r/w 148 and 263.
  3. S 144C [Dispute Resolution Panel] shall be set up to look into all tax disputes.
  4. National Tax Tribunal [NTT] to be set up. Appeal on the order of the NTT to be made only to the SC.
  5. Settlement commission will be abolished. Instead a Tax Ombudsman to be created.
  6. Wealth Tax will be abolished.
  7. Prevention of Money Laundering Act to include concealment of income as a predicate crime. This would instantly mean seizing concealed wealth from tax evaders and mandatory visit to the prison.

B. Indirect Taxes

  • Will attempt to seek consensus on GST and usher it in by 2014.
  • Strengthen Anti-dumping and Safeguard mechanism against Chinese exports into India.
  • Peak Customs to be held at the current rates. Customs for Crude and LPG will be eliminated.
  • Excise on Diesel will be lowered to less than Rs 2 per litre and this benefit will be passed on to the consumer.
  • State Government will be directed to lower VAT on all petroleum products to below 20%.

C. Governance

  • Since our bureaucracy is over paid and highly unaccountable, the salary of the government officials shall be rearranged to reflect national per capita income.
  • Police and army will be modernized. Expenditure on armed forces to be a minimum 3% of GDP.
  • All children of those drawing salary from the Consolidated Find of India shall necessarily be required to go to Public schools, government officers must travel by public transport and their immediate relatives take to public health institutions.
  • Food grain production to be increased to 450 MT from the existing 250 MT in the next five years. Farmers will be encouraged to use modern technology to improve yields. District collectors shall be responsible to improve yields.
  • As the economic cost of food grains supplied is double the procurement cost and eight times the selling price of food grains through PDS, this mechanism will be disbanded over the next five years. As food will grow in abundance, market forces will take over.
  • Government however will hold strategic food stock and continue to supply to the BPL families for the next five years. Also states must contribute equal quantity for withdrawing equal allocation from central pool from this year. This will prevent fiscal irresponsibility by states and also encourage agriculture at the state level. Further, all subsidies will be phased out in the next 5 years. Prices of Urea will be fixed at a percentage of international prices and aligned to the same in the next five years.
  • All our 600-odd districts will have a centrally sponsored Health centres that will take care of primary health care.
  • Supreme Court shall have more than six benches across the country in Coimbatore, Nagpur, Patna, Shillong, Udaipur and Goa . All states with more than 30 million population to have one additional bench of High Court than the existing ones. Courts to work on two shifts between 8 30 AM and 1 PM and between 2 30 PM till 6 30 PM. Within five years, it shall be my endeavour to bring down judicial backlogs significantly.
  • A Judicial Accountability Act and Right to Services Act shall be passed. RTI Act will be repealed.
  • The government shall encourage extensive use of technology on all matters. And every department shall provide time limits for services to be expected. Any violation shall be viewed as criminal misconduct under the Prevention of Corruption Act. All budget allocations will be accompanied by physical targets. Concerned secretaries of the department will be accountable for the same. Failure to do so will be viewed as criminal misconduct.
  • All government sponsored institutions, ministries and departments that serve no constructive purpose shall be identified and abolished.
  • I will demonitise Rs 500 and Rs 1000 currency notes.

D. Infrastructure:

  • Government shall have a mission to double railway tracks in the next five years. These tracks will be state of the art technology and support train travel at speeds in advanced countries.
  • I will introduce a plan to inter-link all rivers in the country. This will improve irrigation in the country. As a first step all water bodies will be cleaned and repaired by Panchayats out of direct allocations made to them.
  • Infrastructure development shall be the effective employment guarantee scheme. Physical targets shall be fixed and monitored on a daily basis for every infrastructure project.
  • Road encroachments will be tackled on a war footing through the Urban Reneval Mission.
  • Government shall convert NADARD into a Grameen Bank.
  • Environment shall be treated on par with infrastructure.

E. Finances:

  • The 14th Finance Commission will be mandated to explore direct transfer of a portion of Central Taxes to Panchayats. Likewise States may be compelled to part a portion of their revenues to the third tier of the Constitution who will necessarily have to assume some functions for the funds given.
  • Government shall undertake massive disinvestment.
  • Government to bring in Inflation linked bond. Physical gold can be traded for these bonds. Source for Gold [S 68] will not be questioned by IT Authorities.
  • FRBM Act will be reviewed and practical targets set.
  • Under Article 292 of the Constitution, Government will have a ceiling on debt.

Last modified on Sunday, 07 July 2013 07:36