Our Economic Correspondent
A.B. Vajpayee described the Budget as a laughing stock. His cryptic comment was provoked by P. Chidambaram'sludicrous idea of taxing banking transactions. If the idea became a laughing matter, Finance Minister'sexplanation is quite stupid and silly. He wants to lay a trail on the black money, as if the entire unaccounted money is lying in fixed deposits or savings bank accounts. Even if it is lying in banks, is it lying in the fixed deposits of pensioners or middle-income, salaried class whose carry-home cheque is net of the income-tax deducted at source? The Chidambaram ?genius? of unearthing the black money, has no wonder become the talk of the town, undoing in the process whatever little positives his Budget had for the salary-earning tax-payers. Coming under pressure from his own partymen, the FM may raise the ceiling of taxing cash withdrawals to Rs 50,000 or Rs 30,000. But he is quite ?stubborn? about handling the menace of black money, which he thinks is all parked in the bank deposits.
Who has to pay for Chidambaram being stubborn? It would not be a rich builder running a land mafia, or unscrupulous industrialist who shows expenses in his domestic kitchen and his son'sholidays abroad as company expenses. It would be retired middle-class people who had honestly paid income-tax all their lives and are now paying taxes on their pensions. Even if the limit of cash withdrawal is raised to Rs 50,000, it would mean taxing the honest citizens. If a person has saved through hard life a few lakhs of rupees for his daughter'swedding and needs to draw cash for the shopping he would have to pay tax, because the country'sFinance Minister wants to lay a trail on him. Is this what we should call ?reforms with a human face??
As usual, the industry bigwigs were doing studio hopping on the Budget day, eulogising the pronouncements as being ?historic? and what have you. The enthusiasm was punctured within 24 hours after they saw a fine print which meant that every expense that takes place within the four walls and outside the corporate headquarters would be taxed by Chidambaram'staxmen. They call it the Fringe Benefit Tax and have included even the advertising and marketing expenses as the benefits for which the government would put a levy. The taxmen would not spare the telephone bills of the companies. When Shri Vajpayee had described the Budget as a laughing matter, he probably had only the Banking Transaction Tax in mind. One wonders how he would describe the Fringe Benefit Tax.
When Leftists had made a demand for raising the country'stax-GDP ratio by taxing the rich more, they would not have themselves realised the ridiculous extent to which the government can go upto.
It was only after the industry made an outcry that the FM realised something had gone wrong somewhere. After all, which Finance Minister would like the screaming headlines making a mince-meat of his yet another ?dream Budget?? Chidambaram has conveniently put the blame on ?draftsmen? and assured the industry that the genuine business expenses would not be taxed. But here again he would like to be ?stubborn?. His argument is that there should be a tax at every stage of value-addition. In other words, the UPA government which talked so much about making India as the global manufacturing hub, would introduce taxes that act as disincentives to the value-addition by the industry.
On the one hand, the government has appointed the Investment Commission for boosting fresh investment in the Indian industry, on the other, it reduces the depreciation rate from 25 per cent to 15 per cent, leaving little cash for replacement of plant and machinery.
If one takes a look at the Common Minimum Programme of the UPA combine, sectors like housing have been promised liberal sops. After all, the country has a huge unmet requirement of the dwelling units. But then, he would bring the building activity under the service tax, so much so that the cost of a flat in Delhi or Mumbai would go up between Rs one to three lakh.
Let'stake a look at what the Budget has done for the farmers and the common man through restructuring of customs and excise rates on petroleum products. An airline traveller would pay less tax on the aviation turbine fuel than a common man or farmer pays for the diesel. While the customs duty has been cut by 5 per cent for diesel, it stands slashed from 20 per cent to 10 per cent for the aviation fuel.
So much concern for the common man!
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