Winding up the debate on the general budget in the Rajya Sabha, finance minister P Chidambaram, said,"I don't know why the corporate sector should cry hoarse over this taxation."
"The corporate sector has to pay only 12.9 per cent as tax on the book profits while individuals earning over Rs 10,000 pay as high as 40 per cent tax. In fact, the corporate sector pays on an average an effective taxation rate of only 19 per cent," he said.
The statement virtually dashed corporates hopes of the withdrawal of the minimum alternate tax on zero-tax companies, a provision for which was introduced in the recent budget.
The finance minister said he found no justification for the opposition to MAT as the corporate sector paid an average effective rate of taxation at 19 per cent, whereas a large number of individuals in the country paid an average tax at the rate of 40 per cent which was much higher.
He said an individual earning over Rs 10,000 a month had to pay a hefty 40 per cent tax whereas the corporates had to pay only 12.9 per cent of their book profits as tax under the MAT.
Stating that the long-term solution to tax rationalisation lay in having uniform rate, Chidambaram said a draft bill would be ready by December or January.
Expressing concern over the hike in international oil prices, he said it could have repercussions in pushing up the import bill to nine billion us dollars as against the originally estimated $ 7.6 billion for the fiscal 1996-97.
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The finance minister asserted the United Front government would aim at 7 per cent GDP growth over the coming years to combat poverty and achieve growth with social justice.
Efforts would be made on a sustained basis to keep the fiscal deficit within manageable limits, he said.
The finance minister said there appeared to be no consensus on MAT. Some sections of the industry called it a good and necessary tax while others called it a "destructive tax".
Chidambaram said he could not find an answer for an alternative to the MAT even at the consultative committee meeting of his ministry yesterday. None of the members present at the meeting could arrive at a consensus for or against MAT.
"If I abolish MAT, then what is the alternative?," he asked saying he could not find an answer immediately. The long-term alternative was to usher in a regime of moderate taxation on which there had to be a debate.
Chidambram said the industry had been demanding that taxation on dividend income be abolished as that was the only way to buoy up the sagging capital market. The finance minister said he had announced a series of measures to shore up the capital market and hoped they would have an effect on the bourses.