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Chidambaram assures investors of stable tax regime

Last updated on: September 03, 2012 19:19 IST
Assuring investors of a stable tax regime, Finance Minister P Chidambaram on Monday said I-T Department will adopt a non-adversarial approach in realizing the direct tax target of Rs 5.70 lakh crore for 2012-13.

"We will ensure there is a stable tax regime, stable tax laws and everybody (tax department) adopts a non-adversarial approach to tax collection.

"Tax department will be friendly, helpful, interactive. Will help you pay your taxes. Nobody needs to harbour any unnecessary fear of the tax department," Chidambaram told reporters after meeting top officials of the Central Board of Direct Taxes (CBDT).

Referring to the tax collection target of Rs 5.70 lakh crore for the current fiscal, he said the direct tax collections are growing at 10.5 per cent, while the asking rate is 15 per cent to meet the budget target.

"We will be able to achieve the target ... I think the second half of the year, the busy season, we should be able to achieve the target even after factoring the additional refund that has to be given," Chidambaram said.

The Finance Minister said nine out of 10 Indians are tax complaints. "Many professional-run businesses do tax planning. But tax planning does not mean tax non-compliance," he said.

Chidambaram said tax-payers need not harbour fear if their return forms are picked up for scrutiny.

While the corporate tax rate is 30 per cent, effective rate averages 24 per cent due to expenditures, exemptions and carve-outs. However, several sectors are paying only 10-22 per cent tax.

"Therefore, the correct way ... is to look at the sectors which are well below the average, then look at sectors which are closer to the average to see whether the average can be raised. Even if the average is raised from 24 per cent to 26 per cent, we will collect roughly Rs 30,000 crore (more)," Chidambaram said.

The Finance Minister further said efforts would be made to increase the tax to GDP ration to 12 per cent to improve government finances. The ratio which had touched 11.9 per cent in 2007-08 has dropped to 10.1 per cent in 2011-12.

Stressing on increasing tax base and making people file returns, he said India is one of the lowest tax countries and people should pay taxes which is "a mark of civilisation."

To query on human resources in the I-T Department, Chidambaram said about 25 per cent posts are lying vacant.

"There are huge vacancies at every level... We will have to recruit... How can you run a Department where roughly 25 per cent of the posts are vacant...," he added.

To a query regarding taxation in capital markets in wake of the draft report of Shome Committee, Chidambaram said: "Those who administer taxes have to study it first and then tell me what are the upside and downside of the recommendations, then I will make up my mind".

The Committee in its draft report has suggested abolition of tax on capital gains on transfer of securities of listed companies and increase in Securities Transaction Tax (STT).

When asked if the government will wait for the next Budget to bring in changes to I-T Act as suggested by the Shome panel's draft report, the minister said a decision will be taken after the final report is submitted by the month end.

"We would then (after submission of final report) take a call whether it requires urgent amendment to the law or can it wait until February (next Budget)".

On the report of Standing Committee on Finance on 'Current Economic Situation and Policy Options', Chidambaram said it is a "very positive" report.

"It helps the government make up its mind on some difficult issues. And if all the members of the Standing Committee are fully behind that report, and government and that report are on the same page, I think we can look forward to some really forward movement on reforms and taxation," he added. 

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