Bring back long-term capital gains tax: CPI(M)

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`Review double taxation avoidance pact with Mauritius'


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The CPI (M)

also cautioned against going ahead with capital account convertibility.
Calls for steps to protect the small investors who suffer the most from market meltdowns.

New Delhi, May 19

The CPI (M) leader and Rajya Sabha MP, Mr Sitaram Yechury, on Friday demanded reintroduction of long-term capital gains tax on investment in stocks and review of the double taxation avoidance agreement (DTAA) with Mauritius through which most of the FII investments in India are routed.

His comments came in view of the more than 1,300 points fall in Sensex during the past two trading sessions.

"While only a miniscule minority of Indians have benefited from the stock price bubble in India, the rich have got richer through untaxed capital gains. Reintroduction of the long-term capital gains tax and review of the DTAA with Mauritius are the need of the hour.

"Steps are also required to protect the small investors in the stock market who suffer the most from market meltdowns," he said. Stating that the FIIs have taken advantage of the liberal taxation regime to make enormous speculative profits, Mr Yechury told presspersons that "it is a matter of great concern that media reports regarding a circular by the CBDT, containing instructions to assessing officers to help them distinguish between traders and investors, caused such panic and led to a massive pullout of funds by the FIIs."

The CPI (M) also cautioned against going ahead with capital account convertibility on the plea that the asset price boom taking place in the country for the last two years had revealed the volatile nature of the stock market.

"In the context of the continuing rise in international oil prices, currency depreciation following capital outflow is bound to cause inflationary pressures on the economy and hit the common man hard.

"In the light of the volatility being experienced in the capital market, the CPI (M) warns the Government against going ahead with capital account convertibility, which would further imperil the stability of our financial system," he said.

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(This article was published in the Business Line print edition dated May 20, 2006)
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