NEW DELHI: In yet another indication of a possible tax cut in the Union Budget, Finance Minister Arun Jaitley said that India needs a lower level of taxation to be globally compatible and broad base the economy. “Gone are the days of philosophy that high taxation will bring greater revenues. Since 1991, the course of an economy has altered itself,” Jaitley said.
“... what you need is a broader base of the economy for which you need a lower level of taxation. You need to manufacture products and provide services which are more competitive in character and therefore your taxes have to be globally compatible,” he said, adding the competition is not merely domestic, but global.
Extraordinary high taxation rates in the past have led to higher tax evasions, the Finance Minister added.
Speaking to a young batch of Internal Revenue Services officers, the Finance Minister asked them to ensure that voluntary tax compliance increases in India in the future. “Avoidance of government revenue has been considered as commercial smartness and people do not think there is anything improper or immoral about it,” Jaitley said, tracing the behaviour of people over the last 70 years.
Meanwhile, Prime Minister Narendra Modi is set to have a brainstorming session with independent economists and top officials of various ministries at the NITI Aayog on Tuesday. With the 50-day window, sought by Modi to end the pain of demonetisation, nearing an end, the meeting is expected to hammer out a blueprint to put the economy back on track.
“The Prime Minister will be given an overview of the three-year Action Plan drafted by the NITI Aayog to give a push in the short term to various areas of the economy. The Prime Minister is also keen to hear from the officials and independent economists about the impact of the decision on demonetisation. Since the brainstorming is coming ahead of the Budget on February 1, the meeting has a special significance,” sources said.
The three years Action Plan is likely to be unveiled in the first week of January, which will also precede the end of the last five-year plan period (2012-17) concluding on March 31 next year. The three years Action Plan would come in effect from April 1, 2017, added the sources. Modi had mandated the NITI Aayog to prepare the three years Action Plan and the 15 years Vision Document. Independent economists would also be consulted for their view to revive the economy.