The Hindu Business Line : Govt for stable tax rates

Looking ahead
Centre's revenues expected to increase by Rs 55,000 crore.
Taxing of farm income outside purview of Parliament.
Farmers to get loans at seven per cent interest.

New Delhi , March 13

The Finance Minister, Mr P. Chidambaram, today made a forceful case for moderate and stable tax rates, saying that the Government had been able to strike a balance between revenue mobilisation and the need to encourage investments.

Replying to the discussion on the Budget in the Rajya Sabha, Mr Chidambaram said there was an "investment boom" in the country and "at this point, it is extremely important to keep rates stable, tax rates moderate even while mobilising more than 20 per cent increase in Central tax revenues".

Highlighting that the revenue mop-up by the UPA Government had increased over 20 per cent in the last two years, he countered the criticism, especially from the Left parties, that the 2006-07 Budget had made a modest effort in raising tax revenues but had avoided taxing the rural rich while putting pressure on the common man. He said that, after providing for the States' share, the Centre's revenues increased by Rs 45,000 crore in 2005-06 and was expected to increase by Rs 55,000 crore in the next year.

The Minister pointed out that industry contributed an overwhelming portion of the tax revenues, along with personal income-tax (excluding that of the salaried class) and burdening industry with more taxes would only discourage investment. "Look at the spate of announcements, mainly by domestic business houses and some foreign companies, on their investment plans. I believe there is an investment boom in this country and we should encourage that," he told the Members. Turning to Mr Sitaram Yechury of the CPI(M), he said: "I think Rs 45,000 crore is a commendable revenue effort. Can you raise more? Mr Yechury thinks we can. I think we cannot. Even if I concede for the sake of argument we can, I think we should not."

On the politically sensitive issue of taxing the farm income, the Finance Minister was quick to point out that such income cannot be taxed by the Central Government.

"It's only the non-farm income of the rural rich that could be taxed. The non-farm income of the rural rich is indeed being taxed, be it a manufacturing unit or a transport company. It is rural agricultural income which is not being taxed as it is beyond the purview of Parliament," Mr Chidambaram said, adding that no State Government was also willing to tax the farm income of the rural rich.

On the issue of short-term farm credit, Mr Chidambaram promised that beginning this kharif season, every farmer who gets a loan from a commercial bank, regional rural bank or cooperative bank would get it at 7 per cent.

He highlighted that the bank rate was at 6 per cent, the reverse repo at 6.25 per cent, call money between 6 and 7 per cent and interest rates were hardening, though inflation was under control at 4.2 per cent.

"Having regard to all this, we think that the economy can today afford to ask the banks to lend to the farmer at 7 per cent," he said.