Asserting that there has to be some element of rationalisation, Finance Minister Arun Jaitley has said the government may consider the “next round of action” on subsidies.
Addressing students and faculty at Columbia University?s School of International and Public Affairs here, he, however, did not elaborate on what the government plans to do and when.
Jaitley also spoke on the additional 2 per cent surcharge on the super rich and the proposal to reduce the corporate tax from 30 to 25 per cent in phases along with elimination of exemptions.
“No government in India can be against the very idea of subsidies but there has to be some element of rationalisation.
There are many people who are entitled to be subsidised and we will continue to subsidise them. But there have to be exclusions and we have started with areas which are comfortable.
“In the budget I have appealed to people who are in a higher category of tax paying classes to voluntarily relinquish their subsidies. This is the first step towards the next round of action which the government may consider,” he added.
Referring to the abolition of wealth tax and replacing it with additional 2 per cent surcharge on super rich, Jaitley said the wealth tax had been “high-cost and low yield”.
He said in abolishing wealth tax he wanted to simplify the procedure and make it high yielding by adding the two per cent surcharge on the super rich.?
“The practical experience has been that (the wealth tax) is a high-cost and low-yield tax,” the finance minister said.
Jaitley was responding to questions about the budget he presented on February 28 and the future of the Indian economy during an hour-long session at the university.
He said there is a kind of “sadistic thrill” in getting the wealthy to pay more. He said he abolished the wealth tax as he wanted to simplify the procedure.?
“I put a 2 per cent surcharge on the super rich, which I?m told is very few in number in India,?at least as for the record of the tax department,” he said amid laughter from the audience.?”As a result of which, none of the super rich have protested.”?
He added that the same set of people will now pay a two per cent extra surcharge and “I will be earning nine times the amount without any harassment and undervaluation.”
“It’s a cleaner tax, neater tax, it?s simplified and a high yielding tax rather than something that was just there because it had nice sounding words–the wealth is?being taxed.
So I substituted it with an equally nice-sounding phrase–the super rich are being taxed.”?
He further said that in India the corporate tax rate is 30 per cent plus some surcharges while the actual collection is only 23 per cent.
He said he mooted the idea of bringing it gradually down and phasing out all the exemptions.
“I didn’t do it this year because I wanted to give an advanced notice to everyone concerned that this is the intention of the government and we will start implementing it from next year onward,” he said, adding that India cannot survive in competition with the highest tax rate compared to the other Association of Southeast Asian Nations (ASEAN) nations.
“Now to explain it to the Indian political decision makers that a taxation structure with lower rates and no exemptions is much better than a higher rate and multiple exemptions because exemptions can lead to questionable decisions, litigation and are leading to making us less ? ? competitive.”