We Should Consider Increasing Taxes on the 'Rich': FM
Finance Minister P Chidambaram, who has talked about a stable tax regime during his meetings with foreign investors in the last two days, has said that the argument for taxing the very rich "a little more" should be considered.
"I believe in stable tax rates. However, I must concede that there is an argument, underline the word argument, that when the economy requires, when the government requires more resources the very rich should willingly pay a little more.
"That is not to say that tax rate should not be stable. I think we should have stability in tax rates but we should consider the argument whether the very rich should be asked to pay a little more on some occasions," he told
However, he hastened to add, "but that is not a view I am expressing. That is simply an argument that I have heard and I am repeating."
Chidambaram said tax rates that were announced in 1997 (in the Budget he had presented then), have remained and have survived four governments and four finance ministers.
On the Budget to be presented next month, he said the Budget is not drawn up keeping an election in mind. "The election is a good 14 months away from the Budget. The Budget will be a responsible budget".
The Finance Minister said if on February 28 he could show that the government has kept fiscal deficit below 5.3 per cent and if Budget estimates show that the next year's fiscal deficit will be below 4.8 per cent, then he can show a healthy growth in revenues over next year.
"I think that is the time when rating agencies should consider moving us from... I mean improving the outlook and then improving the rating," he said.
Several experts including chairman of Prime Minister's Economic Advisory Council
(PMEAC) C Rangarajan have underlined the need for imposing higher rates of taxes on super rich.
Yesterday, Wipro Chairman Azim Premji had said the suggestion for taxing the super-rich was a "politically" correct thing to do, but expressed doubts whether the government will actually implement the proposal.
India taxes income at three rates - 10 per cent, 20 per cent and 30 per cent. These rates were fixed in 1997.
Referring to the issues concerning declining value of rupee, Chidambaram said there was a need to address the underlying causes like fiscal deficit, inflation and exports as they influence the strength of a currency.
"...Instead of worrying about what is a fair value of rupee, we must worry about underlying causes and we must attack the underlying causes. We must tame inflation; we must shrink the fiscal deficit, which we will.
"And we must find a way to shrink the current account deficit and that can only happen when exports improved dramatically", he said in another interview to Bloomberg TV.
The government, he added, has been taking steps to promote exports and moderate demand of gold with a view to deal with the problem of rising current account deficit (CAD).
On the threat of downgrade of India's sovereign rating by global agencies, Chidambaram said the situation has considerably improved in the last four-five months and there was no case for downgrade.
The economic fundamentals of India are quite strong, the Minister said, adding "it is just that we may have stumbled a bit, the perception of India may have taken a turn for the worst. But once you pick yourself up and keep moving forward and correct the perceptions, much of the concerns about downgrade would melt away."
Rating agencies like Fitch and Standard and Poor's have threatened to lower India's sovereign rating to junk grade in view of the deteriorating fiscal position, high inflation and slowing economy.
India, he said, was expected to record a growth of 5.7 per cent in the current fiscal and had the potential to achieve 8 per cent economic expansion rate in near term.
Moreover, he added, India's debt to GDP ratio at 20 per cent, is one of the lowest in the world among large countries of the world.
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