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Govt will address India Inc's concerns over tax burden: PM

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The Prime Minister, Dr Manmohan Singh, flanked by the FICCI President-elect, Mr Saroj Kumar Poddar, and the FICCI President, Mr Onkar S. Kanwar, at the 78th annual general meeting of the federation in the Capital on Saturday. - Kamal Narang
The Prime Minister, Dr Manmohan Singh, flanked by the FICCI President-elect, Mr Saroj Kumar Poddar, and the FICCI President, Mr Onkar S. Kanwar, at the 78th annual general meeting of the federation in the Capital on Saturday. - Kamal Narang

Our Bureau

New Delhi, Dec. 24

THE Prime Minister, Dr Manmohan Singh, has promised to address, over the next year, the concerns voiced by corporate India over the high direct tax burden.

Delivering the inaugural address at the 78th Annual General Meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI) here on Saturday, Dr Singh said, "Many of you have concerns about the tax system. Over the last two years, we have moved towards lower tariffs, uniform tax rates and easier procedures. There are still some concerns, which Mr Kanwar (the FICCI President) has voiced. I promise to address these concerns over the next year."

The outgoing FICCI President, Mr Onkar S. Kanwar, had said in his address that the unusual growth in the proportion of tax burden on Indian corporates was dampening the much-needed investments. He pointed out that corporate India's direct tax burden stood at over 40 per cent and sought the Prime Minister's intervention in this matter.

"Corporate India today pays 30 per cent corporate tax on its profits. Another 3 to 4 per cent as dividend distribution tax and another 3 to 4 per cent on Fringe Benefit Tax raise the burden. We strongly feel that FBT must be abolished," he said.

The Prime Minister also assured the corporate sector that the Government would work to improve the tax administration to ensure that the industry's interface with the tax system is "pleasant, smooth, problem-free and conducive to easy tax compliance."

In his address, the Prime Minister expressed hope that India would become a genuine common market in the next 3-4 years. For this purpose, he underscored the need to move towards greater rationalisation of VAT and CENVAT (Central Value-added Tax) rates and more importantly towards common goods and service tax.

Stating that the Indian economy needs a massive dose of investments in the foreseeable future, the Prime Minister said that the next decade must be a decade of investment for India. "This investment should convert India into a first-rate agricultural, industrial and service economy. At the core of this is transformation of our manufacturing sector," he said.

Dr Singh called for increasing the share of manufacturing in the national income to a range of 30 per cent to 35 per cent. "This requires manufacturing to keep growing at 12 per cent to 14 per cent in the next decade. An economy of our size and scope cannot ignore the manufacturing sector," he said. He expressed concern that the share of manufacturing in the national income had only shown a marginal improvement from 15.8 per cent in 1991 to about 17 per cent in recent years.

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(This article was published in the Business Line print edition dated December 25, 2005)
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