Govt says deficit rising so tax rebates must go

“The share of direct taxes in the overall tax-GDP ratio has to be necessarily increased. The only option left on this front is to eliminate incentives and step up deterrence,” revenue secretary P V Bhide said while speaking at a Ficci seminar.

The government’s fiscal deficit has come under pressure on account of rising food and fertiliser subsidy bill, farm debt waiver scheme and additional outgo towards national employment guarantee programme. “The need to reduce high fiscal deficit, which initially arose to prevent crowding out investment, has become all the more important to control present inflation, which is not only due to factors within the country but also global environment,” Bhide said.

Pointing out that it was difficult to reduce fiscal deficit in the short-run by cutting expenditure, Bhide said the only option left with the government was to raise additional resources through direct taxes, as indirect tax like customs are being reduced to check Inflation and also honour international commitments.