Ahluwalia said a large number of financial experts, including foreign financial institutions, have reacted positively to the introduction of MAT in post budget-communications to the ministry.
At a panel discussion in New Delhi on Union budget and the capital market, organised by the Capital Foundation & International Management Institute, Ahluwalia said the capital market will get a considerable push forward, once the depository is in place by the end of the current calendar year.
On MAT, Ahluwalia said the government had done a careful assessment of the professional opinion that it received before introducing MAT. He said that while some companies, which had been receiving rather generous tax rebate, stand to lose to an extent, there are others who stand to gain by the lowering of corporate surcharge.
We have to look at the system as a whole. The feedback that we have received from experts, both foreign and Indian, indicates an acceptance of MAT. However, the government, as part of its post-budget exercise, will continue to entertain any concrete suggestions, said Ahluwalia.
On the role of the disinvestment commission, Ahluwalia said that even though the modalities are being worked out and would be finalised following the cabinet nod, the government is keen to give a considerable amount of say to the core group in decision making.
He added that in the event of the disinvesting company not adopting the auction route, the company should be consulted in working out the details of the disinvestment. Even the selection of the merchant banker in such an event should be done jointly by the administrative ministry and the company.
On the issue of whether the government will be able to raise Rs 5,000 crore through disinvestment, given the depressed capital market Ahluwalia said disinvestment need not be confined to the domestic market.
The government can always opt for raising the funds through the GDR route. In any case, the funds have to be raised over the year and it would be unrealistic to write off at this point, the ability of the government to raise funds, said Ahluwalia.
On the contentious issue of non-voting shares, Ahluwalia said that as long as the investor is fully aware of the difference between the two instruments as regards higher dividend but lower capital appreciation in case of non-voting shares, there is no reason why he should not be able to invest in non-voting shares of a company of which he is confident.
Ahluwalia reiterated that it would not be a correct approach to impose certain taxes to bring down the index when it goes up and, more importantly, to come out with a series of incentives the minute the index goes down.
We must understand that the capital market does not consist of the equity segment alone. The debt market is also a part of it. There will always be ups and downs on the equity side. While it should be the endeavour of the regulatory body to curb wild swings, the issue can only be addressed through proper regulation and not by offering sops to the market when it goes down, said Ahluwalia.
The only way to develop a healthy capital market is to have a knowledgeable investor, who divides its investment between the equity and debt segments. While you can earn high returns by investing in equity, there is also an element of risk. The investor should hence go in for a mix of both, advised Ahluwalia.
On double taxation of dividends, Ahluwalia said abolition of double taxation has been a long-standing demand, but this practice is followed in most countries.
Our system too provides for a number of tax incentives on investment in equity. Just because the market goes down doesn't mean we introduce sops on this front too, he said.
