Long-term fiscal strategy statement will help businesses plan operations for 3-4 years’

Long-term fiscal strategy statement will help businesses plan operations for 3-4 years’
The Hindu Business Line, June 16, 2009, Page 15

Our expectation is it should be an investment Budget. We need measures that would propel investments in the economy.

K. R. Srivats, New Delhi

It’s an idea whose time may have come. Whether it gets a new direct tax code or not, Corporate India certainly wants stability in tax policy, especially on the direct tax front. The need of the hour is a statement that would spell out the Centre’s tax policy, including the rates, for a three-four-year horizon, said Mr Chandrajit Banerjee, Director-General of the Confederation of Indian Industry, in an interview to Business Line.

Excerpts from the interview:

Why is manufacturing not doing well? Is it because of taxation?

I would say taxation is one of the reasons why manufacturing is not doing well. The tax administration is not based on trust. A simple and stable tax system along with a trust-based administration would help industry improve competitiveness and, at the same time, shore up revenues for the Revenue Department.

Why do we need stability in tax policy?

India needs a long-term fiscal strategy statement that would help businesses plan their operations for three-four- year horizon. We cannot go from Budget-to-Budget on the taxation aspect. Then there is also the issue of retrospective amendments to direct tax law. It always comes as a blow to industry and reduces its competitiveness. There is also no level-playing field for domestic industry.

So, what are the tax reform expectations from Budget 2009-10? A roadmap for GST…

Our expectation is it should be an investment Budget. We need measures that would propel investments in the economy. GST is definitely one reform that industry would benefit from. The Government is looking at dual-GST system. As industry, we favour a single, unified GST system across the country.

Does this mean you are opposed to a dual GST system?

No, you should not infer it that way. We are pushing for a single GST system. It is not that we will not accept dual GST system.

What are some of your pre-Budget suggestions that really need serious consideration from the Finance Minister?

I would say reintroduction of investment allowance. This is something that can give a boost to the economy.

Why has the CII suggested that the peak rate of Customs duty should be retained at 10 per cent? This seems a different approach compared to previous years.

Yes, we have suggested that peak rate should not be further lowered. In the current economic environment, domestic industry needs some protection.

Given the fiscal situation, do you think the government will revoke some of the excise exemptions and backward area development incentives?

I don’t think so. These incentives were given with a purpose. So long as they are being met, why should they be disturbed? The Government also has to do a fine balancing act keeping in view the social development aspects such as employment generation, etc.