FM puts burden of easing taxes on India Inc

Finance Minister P Chidambaram today ruled out lowering scheduled corporation tax rates without any increase in effective tax rates.

"Show me any Asean country that has an effective tax rate of less than 19 per cent," he said at a post-Budget interaction with Ficci members. The tax rates at 19.2 per cent in India is very moderate, he added.

Responding to a question, Chidambaram said he would welcome a committee to examine moderation of scheduled tax rates as well as raising the effective tax rate to Asean level.

Fringe benefit tax, which accounts for just 1 per cent of corporation tax, will not increase the tax burden of corporations, he said.

"Employees stock options (ESOPS) are taxed world-wide. We are willing to work out method of calculation of ESOPs in consultation with industry," Chidambaram added.

The finance minister said taxing of ESOPS would not affect a company's ability to hire talent, as the proposed tax would apply to all companies.

He sought industry's cooperation in moderating inflation, which is hovering over 6 per cent. The government was not resorting to any price control in the cement sector and invited industry players for talks on duty differential measures announced in the Budget 2007-08. "We are not reinforcing price control," he said.

The Budget reduced excise duty on cement by Rs 50 from Rs 400 per tonne if it is sold at Rs 190 per 50 kg of bag, but raised it by Rs 200 per tonne on higher retail price.

"The government owes responsibility to the people of India to moderate prices where prices seem to have risen unreasonably. Whether they have risen unreasonably could be discussed. But if they have risen unreasonably, surely the government has an obligation to moderate prices," he said.

Reacting to differential tax rates, many cement companies have already increased cement prices.

Emphasising that moderating inflation is good for all, Chidambaram said opportunity to take profit in the short term should not cloud the thinking that in the long-term price stability is a fundamental feature of a sound economy.