T N Pandey: Pre-Budget meetings a waste of time

TAXING MATTERS

The pre-Budget meetings of various groups "" the industrialists, the economists, the agriculturists and the trade unionists "" have been a big disappointment.

The discussion mostly centred around demands for more favours""yeh dil mange more ""instead of reviewing the fiscal position as a whole and taking a balanced view of demands and measures that could boost revenues.

The discussions, one feels sorry to note, were conspicuously one-sided, asking for more concessions, which were based on no empirical studies. This is evident from the account of the deliberations published in the newspaper. The suggestions on:

Income Tax

• Cut down corporate tax rate for domestic companies from 35 per cent to 30 per cent.
• Abolish Minimum Alternate Tax (MAT).
• Restructure income-tax slabs in case of personal taxation.
• Re-introduce investment allowance.
• Investment-oriented tax exemptions should stay.
• Income-tax should not be levied on marketing cooperatives.
• Nominal rate of personal income-tax should be reduced.
• Tax treatment for voluntary contribution to EPF should change in favour of employees.

Interest Rate
Trade unions suggested higher interest rates. They wanted that the rate of interest on EPF should be 12 per cent. In any case, this should not be less than 9.5 per cent as against 8.5 per cent at present.

Other Taxes

• Reduce peak customs duty from 20 per cent to 15 per cent.
• Customs duty be brought down to 5 per cent in four years.
• Cut down the 10 per cent import duty on crude. Asean-level duty is merely 3 per cent.
• A single tax with an appropriate rate for telecom sector be prescribed.
• Duty on capital goods be rationalised at 10 per cent from the existing rate of 20 per cent.
• The present rate of excise duty on cars should be reduced. It is 24 per cent at present.
• Concessional rate of 5 per cent be levied on project imports.
• Duty-free imports be allowed under EPCG.
• Agriculture exports should be exempt from value-added tax.
• Cenvat be integrated with Service Tax.

Among the many suggestions for benefits which would reduce revenue receipts, there was only one regarding a levy. The trade union leaders proposed a levy of income-tax on rural and agricultural incomes.

Strangely enough, none of the agriculture experts who were with the finance minister during the two-hour meeting, made any suggestion for taxing income from farmhouses and commercial crops.

Rather, suggestions were made on umpteen concessions and benefits such as replacement of the Minimum Support Price with remunerative price, fiscal sops for palm oil, bio-diesel, for contributions to Water Resource Development Fund, funds for Rural Development Management Scheme, concessional loans for plantations and host of other such proposals for getting funds/grants from the government.

When so many demands are made on the exchequer for the agriculture sector, there seems to be no reason why the affluent agriculturists should not contribute by way of tax to the country's kitty.

It is also unfortunate that no implementable views were expressed in such meetings for the improvement of the tax system.

Expression of views like tax system should be simplified, tax base should be expanded, etc., without any concrete and workable suggestions have no meaning. Every one repeats such suggestions, but no one bothers to work out the schemes and present it to the finance minister for implementation.

It is equally surprising that no specific suggestions, which would augment the revenues of the government, are made. The emphasis is on the problems concerning the sectors they represent. The interest of the country, as a whole, gets sidetracked and ultimately such meetings are reduced to mere rituals.

Given this scenario, the decision of the former FM to dispense with pre-Budget meetings and receive only written representations seem appropriate. When something is sent in writing, more care and effort is put in support of what is said.

In large meetings, with a number of persons trying to project their individual interests in limited time, constructive approaches become casualties.

Hence, either such meetings should be discontinued or those who are invited to attend these should be asked to send written submissions in advance and discuss only such issues which are of general interest. The invitees should be advised to keep in view the interest of revenue while making their suggestions.

One more aspect of such meetings needs to be mentioned. It is not clear why the taxpayers and tax consultants' associations are not invited. If such meetings continue, it would be only fair that associations of the categories of persons, who bear the brunt of tax laws, should also be invited to put forth their point of view.

Lastly, doing something, which is ritualistic and does not produce results, is a waste of time, efforts, energy and money. Hence, if the pre-budget meetings are to serve any purpose, the present arrangement needs to be reviewed to make these purposive and useful.