Finance minister P Chidambaram is happy with record collections and improved compliance by people and companies.
NEW DELHI: Honesty pays, really. Pay your taxes sincerely and you have the finance minister’s personal assurance that he will cut income-tax rates for individuals and corporations.
P Chidambaram was in a generous mood at the inaugural session of the two-day economic editors’ conference in Delhi on Tuesday. And why not? No other finance minister in recent years has had the opportunity of reporting that he is running far ahead of all tax-collection targets.
The main reason for this, according to Chidambaram, is the change in taxpayer’s attitude.
Compliance by individuals and corporations has improved in response to the moderate and stable tax regime.
The minister does not, however, favour tax concessions to promote investment or industrialisation. He said that as long as wasteful expenditure is not eliminated, the government cannot indulge in the luxury of sacrificing revenue for this or that purpose. Promotional policies should rely on better infrastructure, new technology, and removal of structural constraints, he said.
“There is scope for further moderation (in personal and corporate tax rates),” Chidambaram said. “However, this will depend upon greater tax compliance.”
So, will the minister cut tax rates in next year’s budget? Finance ministry officials said it is too early to say, though the personal income-tax rate at the highest slab and the corporate tax rate can be brought down from the present 30% to 25%.
Chidambaram himself explained why he could be in a generous mood: “The tax system now is not only broadbased, it has lower rates and relies mainly on voluntary compliance. The tax-GDP ratio of the central government has increased from 8.3% in 1998-99 to 11.2% in 2006-07 (budgeted). Tax collections have shown considerable buoyancy.”
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