How satisfactory is this Budget given the huge expectations from it?
A government’s tenure is five years, over which the economy has to be shaped. We can make our economy the fastest growing in the world. If we continue like this for 10-15 years, it is possible to drive poverty out of the nation. Second, we had to worry about the poor too, had to allocate money for them, in addition to giving money to the states. We had to pull off a balancing act. Koi bohot aafat nahin aane waali hai ki agar main do saal ki bajaye teen saal me ye yatra poori kar lun. Highways, ports, irrigation schemes, all will be benefited. We have worried about the poor, the middle class and the industry. There is an empty debate in the country whether you are in the favour of the poor or the industrialists. I am in the favour of both. How can I serve the poor unless I earn from the industry? Hence, I don’t see any contradiction in both these going ahead together.
You have not given much relief to the middle class from taxes?
Only three to four per cent of the country’s population pays taxes. In any country’s taxation system, the number of people paying income tax should go up, not reduce. I will not rule out increasing slabs, but I also have to see how much fiscal space does the government have. And after paying the states so much, my fiscal space had reduced drastically. But instead of increasing slabs, I have tried to compel people to save. The savings in this country, which have gone down to 19-20 per cent, have to be pushed back to 35-36 per cent. Second, they should save for their future. Third, their savings will help the country develop. Therefore, if I just give them the freedom to go ahead and spend and make this a consumption society, I thought savings for the development of the country was a much better option.
You have rolled out a lot of schemes for gold. How can we change our habit of buying so much gold?
If I speak in favour of wealth tax, at least these non-productive assets were revealed although people consistently understated them. But this country loves gold, and people think that if they have savings it should get invested in gold. I have given them three options. First, for raw gold, you can keep it in bank, monetise it, over which you will get interest. Second, buy gold bond of the same value in place of raw gold. And whatever will be the rate of gold in the market, you will gain an appropriate profit over the bond. Third, why not legitimise the huge number of gold coins or guineas that are in circulation in the country, that too many of them illegally? If we stop gold legally, it comes illegally. We talk about urban housing, it was suggested that we should talk about rural housing. And what do they have to get money from the bank? They can use their gold as collateral. So the idea is just to convert an unproductive asset to a productive asset.
Could you give some idea on how the issues of exemptions for corporates and decrease of corporate tax will be tackled?
Why do I need to reduce corporate tax? I have to attract investment in this country, not only international but also domestic. We have 30 per cent plus all the surcharges. Now look at all the ASEAN countries. They average 21.2 per cent. Our competing economies are almost 10 per cent cheaper when it comes to the cost of tax. So I lose out in competition. My own investors are setting up units in other ASEAN countries. And I need investment to create jobs. So I lose on two counts. My image is of a high tax country and secondly, on account of these exemptions, I end up getting only about 23 per cent. I don’t want to go back on the promises of what exemptions are there. There are some exemptions which have a sunset date, others we can phase out easily. I didn’t do it this year because I didn’t want to take anybody by surprise. But a programme for phasing out will have to be started.
Why do you need a special Act to tackle black money?
This new law that I have announced is specific on foreign assets. If you are an Indian citizen and you keep an asset abroad illegally, it only applies to that. It also does not apply to domestic black money, we have other laws for that. Now the purpose of the money laundering Act, the violation of the Income Tax Act, is not a predicate offence. If I say that to have a bank account abroad and an asset abroad illegally, it is not a predicate offence… When the law comes out you will notice, there will be a window under which everybody will have to make a disclosure, pay the taxes, we will be charging you penalty, and thereafter, you put an end to your sins. After that window closes, if we catch anybody with monies abroad, he will be prosecuted, it won’t be a compoundable offence, it will be a deterrent punishment.
What kind of direct tax regime will it be when GAAR has been postponed yet again?
GAAR is for anti-avoidance. It is to ensure that people are not using loopholes to avoid tax. There are a number of interpretations and challenges regarding how to implement it which can also be quite disruptive. The best way to do it right now is to park it, set it aside for a couple of years, and then come back and see whether it is meeting the purpose for which it was designed.
West Bengal and Bihar have been picked out for special assistance. Both are poll-bound states…
The Prime Minister has consistently said the eastern part of the country needs to grow faster. We said the money from the coal auctions will go directly to states. So Jharkhand will benefit substantially, so will Orissa. Bihar is agriculture rich, not mineral rich. West Bengal has some minerals, but industry is less than 5 per cent of the state’s total GDP. The kind of mineral in Jharkhand and Orissa is attracting investment. Bengal is relatively slow. Therefore, these are the two states that need certain incentives.
(Transcribed by Siddhartha Gupta)
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