Experts warn of higher tax regime

Experts warn of higher tax regime
The Financial Express, July 8, 2009, Page 13

fe Bureau, Mumbai

Noted tax consultant and Supreme Court lawyer, Homi Ranina has said that the next Union Budget of India, to be presented in February 2010, is expected to be worse than the recent one, as government would have no option but to take stringent measures to narrow the fiscal deficit of the country.

India would witness a high tax regime at least for the next 2-3 years.

While delivering a lecture on Implications of the Union Budget 2009-2010 at C H Bhabha Memorial Endowment Public Meeting at the Indian Merchants’ Chamber in Mumbai on Tuesday, Ranina said, “The proposed GST and direct taxes code announced in the recent budget are aimed at raising the revenues from people, while reducing huge government borrowings. I believe, most IT exemptions would get withdrawn under the proposed direct tax code.”

“To check fiscal deficit, we cannot afford to print more currency like what’s happening in the US. The government has no choice but to increase infrastructure spending, promote public savings and tax them more to narrow the fiscal deficit in the years to come,” he said.

Also in the next few years, the effective corporate tax rate in India is expected to rise to around 32% from 21% currently. Responding to a queries , he said that India, presently, cannot absorb huge disinvestment of the public sector units.

“If PSU IPOs try to suck over Rs 7,000 crore from the country in a year, than the secondary market would get severely hit,” he said.

Ranina did not welcome the recent budgetary announcement pertaining to the taxation disputes raised by the foreign companies operating in India. “The announcement is mainly aimed to earn foreign money through the taxation route,” he said.

Ajit Ranade, chief economist, The Aditya Birla Group said, “In the prevailing scenario where government spending is restricted and corporate spending is under sever pressure, the recent Union budget has made an effort to promote consumer spending in the country.”