'Unless you set ambitious targets, you can't collect taxes'

Q&A WITH FINANCE MINISTER

Finance Minister P Chidambaram said his third consecutive Budget was all about sustaining India's growth story.

You have estimated a 28 per cent increase in corporate tax. Could you dwell a bit more on that?

It takes into account baseline projections plus growth rates. In 2004-05 we collected Rs 83,000 crore as corporate tax. In 2005-06, we collected Rs 1,03,573 crore as corporate tax. That is a growth rate of approximately 24.7 per cent.

So given the baseline projections plus the GDP growth rate, we have calculated what is being projected here "" Rs 1,33,000 crore of taxes. These targets are indeed ambitious, but unless you set ambitious targets you can't collect the taxes. We might fall short a little here or there, but overall, tax revenue is a target I must meet. I am meeting the target this year and I am confident of meeting it the next year.

Do you think that minimum alternative tax (MAT) will contribute to this increase?

MAT is really an advance tax. One can take credit for MAT over seven years. So MAT simply gives me the tax a little earlier. But one can take credit the next year. So over this seven year period, there is no additionality by way of this tax.

What is the matrix you are using to manage government expenditure?

Sixty-six per cent must be spent within the first nine months. If you don't spend 66 per cent in the first nine months, you lose the difference between the 66 per cent and what you've spent. Suppose you've spent only 61 per cent, then 5 per cent is cut off on December 31. They (the departments) can only spend 33 per cent in the last three months.

What explains the modest increase of around Rs 6,000 crore in the overall total expenditure?

A majority of the total expenditure is Plan expenditure; non-Plan expenditure is only going up by 5.5 per cent. This is a small increase. We are keeping it under control.

If it is the revenue side you're talking about, then the bulk of the growth will come from direct taxes, income tax and corporate tax which will give me Rs 2,00,000 crore to Rs 2,10,000 crore. And service tax is giving another Rs 34,000 crore. And customs, thanks to crude oil price, is not declining, it is growing.

Did you hold back on the service tax front in terms of adding more services?

Yes, there are several more items which can be added...

Such as?

Such as journalists...

What about lawyers ? What about politicians?

(Laughs) But they don't render any service. And politicians render a disservice...

One by one! What is the hurry ?

Well, the Economic Survey has talked of labour reform. But there's no mention of this in the Budget.

The Economic Survey for years has been saying many, many things. But every year you can only do so much. What is new about it this year? But the ability of government is limited by resources, limited by policy constraints, limited by programmes... there are any number of such factors.

But what about pension reforms? Is there no consensus on that?

The Parliamentary Standing Committee on Finance has supported the Pension Bill. So why do you say there is no consensus? There are dissenting voices. Consensus does not mean unanimity. I hope we will be able to convince the dissenters also.

What is the thinking behind introducing the 'statement on revenue foregone' from this year?

Just to show the difference between legislated tax and the actual tax collection "" the difference being explained by the various exemptions which are granted.

Are you trying to build up a consensus on removal of exemptions?

Yes, it is to point out the extent of exemptions that are granted and to focus (attention) whether the exemptions are merit exemptions or non-merit exemptions. The world over this sort of statement is the norm, we are only introducing it for the first time. The country must know what Parliament is legislating and what Parliament and the Executive are giving away.

Why have you pegged the disinvestment proceeds at only Rs 3,840 crore in the Budget ?

We have only put two (PSUs) so far. As and when we approve more, we will take it further. This has nothing to do with the Budget. This is a pass through. Two have been approved "" PFC and NMDC "" which will mop up Rs 3,840 crore which will be passed through to the (investment) fund. There are no disinvestment targets. This has nothing to do with my Budget or the April-March limit. It can happen any time.

How do you propose to go about the EET implementation?

We have just received the report. Once we make up our mind, we will announce the decision. But it can only be a gradual and calibrated process.

EARLIER, AT A PRESS CONFERENCE, THE FM SAID:
On FBT:

A higher corporate tax does not advance the principle of horizontal equity. The FBT is justified as it promotes a horizontal and vertical equity.

On Sixth Pay Commission:
Since Prime Minister Manmohan Singh has already announced the government's decision to appoint a Sixth Pay Commission, it is redundant to announce it again.

On not reducing the CST:
We have not deferred the decision to phase out CST. We could reach an agreement (with the states) in March or April or May and then we will go back to Parliament.

On why STT was increased:
When shares prices were increasing, STT got the government larger revenues. We are trying to capture the capital gains in the STT.

On imposing a service tax on ATM:
The service tax on ATM is not linked to the amount withdrawn. It has to be borne by the service providers, who may or may not choose to pass this on.

On taxing the rural rich:
No one has told me to tax rural rich. If you mean tax the rich farmers, then the Constitution does not allow the Centre to tax farm income.

On LPG being made a declared good:
The prices of LPG will not become cheaper immediately. Now LPG would attract a uniform 4 per cent.