Speaking to a gallery of mediapersons after his second budget in the UPA regime, P Chidambaram was at pains to defend the new 0.1% (Rs 10) tax on cash withdrawals exceeding Rs 10,000 a day, as an anti-tax evasion measure. “This is not meant to be a revenue-earning measure... I can even make it Rs 5,” the minister said, when asked whether he wasn’t proposing to tax the honest taxpayer for the existence of huge black money in the system.
“Even for an ATM transaction or on outstation cheque, you pay a service charge,” the minister said. Large cash withdrawals without any ostensible reason currently leave no trail. There is a need to move relentlessly towards a cheque economy, he added.
Referring to the removal of standard deduction, the minister asked, “How can one be annoyed at the removal (of the deduction) after the consolidated limit of Rs 1 lakh for savings and the revision of exemption levels?”
There is adequate justification for depreciation being higher than the income tax rates, Mr Chidambaram said.
The finance ministry would set up a unit in a month or so to specifically track high networth individuals. The minister said he would further “clean up” tax exemptions through separate Bills on direct and indirect laws to be introduced in Parliament shortly.
Pertinently, the minister said he was not setting any target for disinvestment for the next fiscal. “I intend to go according to the pace allowed by the CCEA (Cabinet Committee on Economic Affairs.”
On FDI-liberalisation proposals for mining, trade and insurance, he said, no caps had been proposed in the Budget because these were ‘new areas’. “The government will discuss the proposals with all stakeholders and subsequently carry out the liberalisation.” The proposed increase in cess on petrol and diesel by 50 paise per litre, he said, was not going to cause inflation. “Inflation is a function of a combination of factors...it is not to be considered belonging to or caused by the tax change on a particular or few commodities.’
The finance ministry and the Planning Commission will act in cohesion to institute a mechanism for periodic measurement of the “outcomes” of various budgetary announcements meant for the rural and agriculture sectors and the deprived. “I’m going to take this up with the Planning Commission deputy chairman shortly,” he said.
The proposed changes in the petroleum duty structure are broadly revenue-neutral, he said, considering the current levels of crude oil imports and prices.
On subsidies, a subject on which he had to blink in the Budget speech to placate the Left, Mr Chidambaram said he would have to continue with them in the present form, until the UPA took a final decision for their restructuring. “Action is already underway,” he said, referring to the decentralised foodgrain procurement mooted by agriculture ministry and the projections of a pruning of the fertiliser subsidy bill as natural gas progressively replaces naphtha, furnace oil and LSHS and fertiliser feedstock. Decentralised procurement would not mean a diminished role for the Food Corporation of India (FCI). The tax restructuring for the petroleum sector in the budget too has attacked subsidy, he said.
The minister said there would be a “pause” in FRBM compliance for the next fiscal, on account of the strain the Twelfth Finance Commission recommendations would exercise on the Budget. By financial year 2006-07, the FRBM obligations would be fully met.
The minister expressed confidence that Vat would be implemented as scheduled from April 1. “The government will resolutely carry out the tax reform, and the states would be compensated for any loss in revenue as promised,” said the minister.
