I am surprised at S K Choudhury's letter to the editor, "Not a thrilling prospect" (March 2), in response to my piece, "Simpler and more certain taxation" (March 1) on Budget 2016-17. While in my piece I say this is "an indirect tax Budget so positive that it is almost thrilling", Choudhury says it is "killing". I understand that "thrilling" rhymes with "killing". Unfortunately, most of Choudhury's arguments are regarding direct tax, and hence, not relevant to my piece on indirect tax.
Choudhury says inflation may rise when oil prices increase. This is irrelevant to my article. He also says Finance Minister Arun Jaitley has not made much progress on the recovery of black money. This, too, is irrelevant.
Then he makes the statement that indirect tax is "regressive" and "retrograde". In the entire literature of economics, the word "retrograde" is never used for a tax. A tax might be considered regressive only in combination with all other taxes, such as direct tax, welfare tax and even expenditure on welfare (Ben J M Terra in Vat Monitor, January 1990). A "regressive" tax may be the best way to finance pro-poor expenditure to eradicate poverty (Liam Ebrill et al, The Modern Vat, International Monetary Fund, 2001, page 105).
No country has been able to do away with consumption tax, not even the USA, Canada, Australia, Japan or countries in Europe. All of them increase consumption tax in exigencies. Calling this Budget retrograde because of a marginal increase in indirect tax is borne out of political hatred.
The measures to reduce litigation adopted by Jaitley are not illusory. The system of settlement of disputes at the first stage of appeal may well succeed because it has already succeeded at a higher stage that was introduced earlier. Nothing succeeds 100 per cent, but good institutions have to be put in place. Jaitley has also decided to set up 11 new Benches of the Customs, Excise and Service Tax Appellate Tribunal. Jaitley is possibly the first finance minister to take concrete measures for withdrawing pending litigation in cases that have already been decided by the Supreme Court. Choudhury has ignored all these good measures.
Sukumar Mukhopadhyay New Delhi
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