Prudent spending by the government is an issue that needs to be addressed in order to deal with the problem of tax evasion, Prime Minister Narendra Modi said while addressing economists and experts at Niti Aayog’s meeting on ‘Economic Policy — The Road Ahead’, the think-tank’s vice-chairman Arvind Panagariya told reporters here on Tuesday.
“The context was that some of the speakers had said that the revenue that we collect is only a fraction of what is due, which means that there is evasion happening. Then the Prime Minister made the point that one of the issues we need to address is we spend the money prudently. Those are my words, not his words but I’m trying to extract the implication of what he said that if we spend prudently, the tax payer is happy to pay,” Panagariya said in a media briefing post the meeting.
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“He said that it is not that the taxpayer does not want to pay taxes, but when the taxpayer pays taxes, he or she also wants that the proceeds from the revenue are valued. So if someone sees that my tax revenues was used to create a hospital where my own family or children get proper treatment, nobody evades the taxes. But when expenditures are not properly done, then people want to evade the taxes,” Panagariya added.
Furthermore, simplification and reduction in tax rates was also a key suggestion made by economists, he said. “Tax simplification figured quite a lot…on the direct taxation, both corporate and personal income tax on simplifying, reducing exemptions, bringing down tax rate and aligning tax system to make India competitive with international destination,” Panagariya said, suggesting that this suggestion was made in the context of the upcoming Budget exercise.
Along with those for simplification of taxes, suggestions to prioritise spending in the upcoming Budget on digital connectivity and rural housing were also made by experts. The Prime Minister also informed that the date of Budget presentation was advanced so that expenditure is authorised by the time the new financial year begins, according to an official statement.
“He said that in our existing budget calendar, the authorisation of expenditure comes with the onset of the monsoon. This he said, results in government programmes being relatively inactive in the productive pre-monsoon months,” the statement said.
The meeting was also attended by the finance minister Arun Jaitley, all his department secretaries, other secretaries of departments such as DIPP, telecommunications, and information technology. It was also attended by economists and experts including Pravin Krishna, Sukhpal Singh, Vijay Paul Sharma, Neelkanth Mishra, Surjit Bhalla, Pulak Ghosh, Govinda Rao, Madhav Chavan, NK Singh, Vivek Dehejia, Pramath Sinha, Sumit Bose, and TN Ninan.
These economists and sectoral experts also held another meeting with Panagariya earlier during the day on issues such as job creation, skill development and agriculture before briefing Modi on the steps needed to be taken in the upcoming Budget.
Panagariya also said that the issue of delegitimisation of high-value currency notes also figured in the discussions but only in the context of formalisation of the economy. “Some speakers said that the move is on as a result of following up on demonetisation that the economy is going to get more formal, we are promoting to make transactions digital, and other ways to bring transactions in the digital economy,” he said.