The Hindu Business Line : CII call to tax farm sector

EXPRESSING concern over deteriorating fiscal situation in the Southern region, the Confederation of Indian Industry (CII), has called for bringing agricultural sector under tax net to bring in additional revenue.

"Taxing agricultural income, as recommended by the Kelkar Committee, is necessary from the horizontal equity and revenue productivity point of view," the CII said.

Analysing the fiscal situation of the region threadbare in the first of `Policy Primer' series, the Confederation also called for active participation from political leadership for improving States' capability to invest in economic and social infrastructure.

"Measures should be taken to promote and encourage investment from both the domestic and foreign investors. For this, they need to build an investor-friendly image," it said.

An early implementation of VAT (value-added tax) would encourage and result in a better system by plugging the avenues for tax evasion.

While making efforts to ensure continuity in the reform process in general, the States should take up power sector reforms to improve the profitability of power utilities by reducing transmission and distribution losses.

The apex chamber also felt that slapping `user cost' charges on those who had the ability to pay.

While calling for disinvestment of loss-making public enterprises, it said the displaced manpower should be suitably redeployed elsewhere.

On the expenditure front, the CII felt that there was a need to keep tabs on human resources. "The excess and surplus staff should be retrained and should be encouraged to set up their own businesses."

It also highlighted the need for outsourcing of services to improve efficiency. It, however, cautioned that uncontrolled outsourcing might result in increased expenditure.

What prompted the CII to raise an alarm is that revenue deficit in all the States, barring Andhra Pradesh, has crossed 50 per cent. "Kerala fares very badly with a revenue deficit of 80 per cent of the total fiscal deficit," the maiden `Policy Primer' said.

This, it observed, would leave no room for spending in the social sector.

It also warned that Andhra Pradesh, Karnataka and Tamil Nadu might land in debt trap as the indebtedness of these States have been increasing.

The fiscal situation in the Southern region is, however, better when compared to States in other parts of the country.

"Fiscal consolidation can be achieved if appropriate policies are put in place," it felt.

More Stories on : Industry Associations | Income Tax | Andhra Pradesh

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