New Delhi, Jan. 21
THE Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested a multi-pronged agenda to effect a five-fold increase in the number of taxpayers from the current base of 3 crore to 15 crore by 2010.
The chamber has called for reducing the tax burden and the cost of compliance to control tax evasion.
In a paper on widening the tax base and reduction in tax evasion, FICCI has pointed out that the tax/GDP ratio in the country is one of the lowest in the world, a phenomenon that breeds inequity, leading to tax evasion and corrupt practices.
Measures suggested to enlarge the tax base and encourage voluntary compliance includea flat 15 per cent tax be levied on agricultural income over Rs 5 lakh. It has also asked for allowing deduction for contributions to candidates nominated for elections by recognised political parties.
The paper has also urged bringing more services under the tax net and controlling inspector raj.
A wider tax base leads to enhancing the tax-GDP ratio of a country because it is usually followed by an aggressive move of reduction of tax rates, the paper said. This strategy increases revenues of the State without evoking irrational behaviour from the assessees wherein they decide to evade tax due to excessive tax compulsions causing inefficiencies to creep into the tax system.
"We must simplify, rationalise and modernise our tax structure and streamline our administrative procedures to reduce tax burden and compliance cost to encourage voluntary compliance and induce persons to come forward in the tax net," it said. Towards this end, the fiscal policies should be compatible with the core economic policy goals of promoting efficiency, equity, rationality and high quality growth, it stated. "We should generate additional resources only through a non-distortionary tax regime supportive of savings and growth-oriented investments," FICCI in its paper said. Regarding rationalisation of tax rates, the chamber said moderate tax level is inevitable not only for industrial and economic growth but also for encouraging voluntary compliance and widening the tax base. It is important that the corporate tax rate is brought down to 30 per cent to enable corporates to be on level playing field, to be competitive and on growth path to create larger job opportunities.
Income slabs and the tax rates for individuals should also be remodelled with maximum rate of 30 per cent made applicable over an income of Rs 10 lakh and threshold exemption limit raised to Rs 1 lakh for all individuals.