NEW DELHI, May 9: The Lok Sabha passed the Finance Bill, 1997, by a voice vote on Friday after finance minister P Chidambaram warned the tax evaders of prosecution if they failed to come out clean taking advantage of the voluntary disclosure scheme.

While replying to the debate on the Finance Bill, Chidambaram defended the decision of the government of lowering tax rates. At the same time he also made it clear that this was ``one last chance for tax evaders to come clean'' and added that behind the velvet glove there was a firm fist.

Chidambaram managed to successfully pilot the Finance Bill after the CPM declared its intention of taking its reservations about the bill to the people rather than pressing the same in parliament. Various amendments moved by the BJP were either withdrawn or defeated in the Lok Sabha. The bill will now go before the Rajya sabha for being returned to the president for assent before May 14.

In his reply, Chidambaram rejected the criticism that both the dishonest and the honest were treated alike by offering 30 per cent tax rate for the disclosed black money. He pointed out that the scheme was made attractive for giving the tax evaders a last chance to come out clean.

The minister said none of the political parties had opposed the scheme during the post-budget discussions with him and in fact West Bengal chief minister Jyoti Basu and the BJP manifesto had suggested such schemes.

The minister blamed the high tax rates in the past for black money generation and said lowering of the income tax rates apart from ensuring better compliance would induce higher domestic savings and capital formation.

In an apparent reference to his predecessor Manmohan Singh's contention that peak rates of income tax should be at 40 per cent in a country like India, the minister said, ``I believe India's tax rates should be competitive at Asian levels and encourage savings and capital formation for investment".

The finance minister also turned down the BJP demand for exempting income from UTI and mutual funds from tax as dividend income. He added that as much as 92 per cent of money from UTI and mutual funds came from interests and capital gains and only eight per cent from dividends.

Chidambaram also made it clear that there was no justification for exempting retail traders from furnishing audited accounts for the purpose of tax, saying it was consistent with existing provisions.

Rejecting the criticism that the budget favoured elite and had nothing for the poor, the minister said his policies were aimed at reducing fiscal deficit, controlling inflationary pressures and providing infrastructure services coupled with a frontal attack on poverty and generation of employment.

Growth by itself had little meaning without the removal of backwardness and poverty, he said. ``Growth with social justice is the motto,'' he said.

Chidambaram said that since 1994-95 there was sluggishness in growth. He further pointed out that the interest rates were high, tight money policy was pursued and there was slow down in industrial growth.

The finance minister, however, sounded optimistic and said that investment would pick up now due to various measures taken by by the government, including the announcement of the credit policy.

Chidambaram said inflation rate has come down and the according to the latest figures it was 6.35 per cent.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.