Financial Daily from THE HINDU group of publications
Thursday, Feb 27, 2003
Budget reading makes imminent sense
Silence may not always be golden.
THE Finance Minister, Mr Jaswant Singh, probably means well when his confidante says that he is proposing to reduce the length of his Budget speech, targeting it only at consumers. That is a noble sentiment, but the new team in the Finance Ministry may not realise the kind of havoc such a decision could cause.
The Finance Bill does carry the details of all the proposed Budget changes. And access to it has indeed improved with the advent of the Internet. At the same time, the net penetration itself has not grown to that extent that all our manufacturers, big and small, across the country would be able to hook on to the Internet to gain access to the document.
Besides, any one who has tried to download the Budget papers on Budget day would know the daunting nature of the task. This is understandable if one visualises 100,000 people, if not more, targeting the same document at the same time. Despite the claims of the Finance Ministry of having made the necessary arrangements, the clogged systems make access to the document on Budget day near-impossible every year.
This is the reason why one sees serpentine queues in front of Parliament, consisting of people who have arrived at dawn to collect papers, which are actually booked days in advance. These people assemble here not because they have a penchant for collecting the Budget documents on the D-day itself like first day cover, but because it is often a necessity. This set of people often have goods in their factories, which would have to be cleared according to the new rates of duties, which come into force at midnight on Budget day. The one class of people who can actually wait till the next day come to think of it are the consumers, the salaried and companies and firms paying corporate taxes. This class of public will actually need the details of the budget only on April 1, when the direct tax laws come into force for the new fiscal.
Further, the government advisors may be oversimplifying things when they say that the public can read the Budget papers to arrive at the tax implications for them. The Finance Bill is definitely the simpler of the Budget documents, yet it is not so easy for an ordinary person to wade through the cross-references and legalese to arrive at the effective rate of tax.
For trade, life is even more complicated since the Finance Bill has to be read in conjunction with indirect tax notifications, which are tightly packed, dull boring numbers, notations, cross references to existing law running into several pages of print.
The tax authorities themselves cannot be blamed since exemption of every kind to every imaginable category of goods has resulted in constant changes to tax laws being. So much so that we have reached the stage where it is difficult for even professionals to easily understand their implications. It is because of this reason that there is so much of talk of simplifying the tax laws.
The fact of the matter is that when the Finance Minister covers the significant changes he has made in the Budget, he is often alerting the public that they need to look up the new law if it has a tax implication for them.
Even after this "alert", industry often has to seek the assistance of tax consultants to understand what the proposed tax law says. It is because of this complicated and convoluted nature of the Indian tax law and the business potential that it throws up today for advice that we see chartered accounts, who are actually experts in company law, turning into tax law consultants.
One of the booming businesses following the Finance Minister's Budget presentation are seminars held by consultants for their clients to demystify the Budget. These seminars are often held two-three days later, clearly indicating there is much to be unravelled even after the broadcast, Internet and print media have had a field day, laying bare the document.
Some of these seminars are organised free, but most require clients to pay Rs 5,000-10,000 per head for participation. To lend authenticity to their explanations, the consultants often rope in government officials involved with the Budget-making process to unravel the document's implications and clarify issues that arise in the reading of the fine print.
It is interesting to note that a substantial number of those present are actually company secretaries, cost accountants and chartered accountants, who are professionals in their own right and should be able to tackle the Budget document without seeking professional help. Yet, this is not the nature of Indian tax law, comprising of thousands of tariff lines, classifications and sub-classifications, exemptions and rates because of which you have to ring in "experts".
It is because of this reason that continuing with the existing pattern of Budget reading makes imminent sense. The reading partially spoils the fun for the tax consultants, but it also has another important function. Given the legal nature of the Finance Bill, the summary of a tax proposal spelt out simply in the Finance Minister's speech gives industry an idea of the Minister's thought-process when he imposed or repealed a tax.
It is also worth mentioning that in an era of liberalisation and globalisation, a finance minister cannot possibly project himself as being anti-business. This is an old mindset where all businessmen were viewed as thieves and profit-motivation seen as being akin to vice. Today, our industry forms the backbone of the economy and our entrepreneurs are the glue that keep the economy going. Countries such as China have surged ahead of us primarily because of the fact that they respect enterprise. Let our leaders not be different. Let not our finance ministers discriminate against industry (just as they should not discriminate against our working classes), for without enterprise and jobs it creates, our consumer and working classes would be doomed.
(The author is a freelance writer. She can be contacted at email@example.com)
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