The Hindu Business Line : Economists for retaining FBT, phasing out tax sops for software

ECONOMISTS today urged the Finance Minister, Mr P. Chidambaram, to carry forward fiscal consolidation at both the Central and State levels and suggested that exemptions under the indirect tax regime be done away with to improve revenue collections.

At a pre-Budget meeting with the Finance Minister here, the economists also recommended that the existing corporate tax structure and fringe benefit tax (FBT) be retained. They however sought review of exemptions available to corporates under the income tax law.

On exports, they suggested introduction of weighted tax incentives for different categories of incremental exports. Attachment of export obligation requirements on incoming foreign direct investment (FDI) was also suggested for increasing exports. The economists also recommended phasing out of tax incentives for software exports.

As regards capital markets, the economists wanted the Government to monitor the growing volume of foreign institutional investor (FII) inflows for avoiding undue volatility.

They also called for improved corporate governance as an objective in formulation of tax policies pertaining to taxation of capital market instruments.

To derive maximum benefit of the State-level value-added tax (VAT), the economists recommended the removal of Central sales tax (CST) by announcing a roadmap for its elimination.

The economists also wanted the Finance Minister to consider introduction of an `inheritance tax' with tax concessions for philanthropic contributions to educational institutions on the lines prevailing in the US for encouraging growth and expansion of educational institutions. They also called for a change in the rules governing `not for profit' educational institutions for encouraging greater involvement of private enterprise in higher education.

The economists and economic experts who attended the pre-budget meeting included Mr Suman Bery, Director-General of the National Council of Applied Economic Research (NCAER), Dr Saumitra Choudhuri, Economic Advisor, ICRA, Dr Kavita Rao from National Institute of Public Finance and Policy (NIPFP), and Dr Nagesh Kumar, Director-General of the Research and Information System for Developing Countries (RIS).