Federation of India Chambers of Commerce and Industry on Friday warned that the new taxes on the corporate sector like Fringe Benefit Tax would severely hit the tottering savings and investments.
In an appeal to the finance ministry, Ficci said budget proposals for consolidation of fiscal management through tax rationalisation and slowing down growth of big ticket spending are unlikely to boost revenue receipts.
FICCI cautioned that the proposals that inhibit growth of credit and investments in the private corporate sector need to be addressed in the Finance Bill to ensure that manufacturing sector is not starved of growth-inducing resources.
The net government borrowings may crowd out credit flow to the sector, it warned.
Pointing out that zero budget receipts from divestment of equity in PSU units sends negative signals, Ficci called for firm time-bound targets for proper targeting of budget subsidies and said dereseravation of 108 products in small-scale industry should be followed up with flexible labour policy.
Citing double-digit tax revenue growth in the last three years and 20.9 per cent projected in 2005-06, Ficci said corporate taxes has been one of the most buoyant taxes with growth rate of 26.1 per cent in 2002-03, 37.7 per cent in 2003-04 and 30.6 in 2004-05.
Any new taxes on the sector would dampen the robust growth of tax collections and further hurt the investment sentiments, Ficci said.
Though share of corporate taxes in gross tax collection has more than doubled from 14.8 per cent in 1995-96 to 29.9 per cent in 2005-06, the chamber said savings and investment rate has been negatively impacted.
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