Taxes are collected and paid for civilisation. A Budget document is a repository of the policies of the government of the day. The salient feature of the document is that in the next financial year the government is likely to restrict the fiscal deficit to 3.5% of the GDP. If at the end of this year it is achieved it would be highly commendable.
The outlay on agriculture, rural employment, MNREGA, rural electrification and irrigation has been increased considerably. But whether the outlays would be properly utilised is the question because implementation is the area where the government fails. In the health and the education sector though the estimated expenditure has been increased the stress is mainly on Skill India and gas connections. It would have been better if more nurses and doctors like LMPs etc were made available. This would have increased employment and would have made cheap medical help available to the villagers. The outlay on infrastructure is quite high and is required and commendable.
The question is as to whether the amount of R25,000 crore is sufficient for the recapitalisation. Though the finance minister talked of introducing technology in procurement it is one area where a proper control would lead to large savings.
As far as the total outlay is concerned, it is nearly R20 lakh crore of which R5.05 lakh crore is in the planned area and the balance in non planned area. The borrowings are to be approx R6 lakh crore.
As far as the direct taxes are concerned the details have to be seen because in the last many Budgets it has been seen that the details contain many contentious issues. One of the contentious issues in the budget is the voluntary disclosure of undisclosed assets between the period 1.4.2016 to 30.9.2016. If this is not Voluntary Disclosure Scheme then what is it. It is likely to be challenged as the government had given an undertaking to the apex court that it would not come out with a VDIS Scheme. One important proposition in the Budget is the taxation of withdrawals from provident funds. It is penalising a section of taxpayers who pay proper taxes on their salary. The alternative dispute mechanism is not likely to work in the majority of the cases primarily because additions in many cases are made for reasons other than revenue. In such cases even payment of 15% of tax for obtaining a stay would be a hardship because the demands raised are exorbitant and have no relationship to the actual facts. The enlargement of presumptive tax would reduce the cost of compliance. But there are various sections and rules which need to be amended to reduce the cost of compliance. The levy of 10% in addition to dividend distribution tax where the dividend is more than R10 lakhs is a tax which is not collected under any other tax system. The other reliefs given under direct tax are more cosmetic.
The Budget has not done to increase the economic surplus of the taxpayers. In fact by the levy of indirect taxes the tax is more on the poor. There is nothing in the Budget for increasing the exports. Leaving out the ease of doing business there is nothing for the private sector. Ease of doing business can only improve by a National Competition Policy and by each state having its own agency for enforcing competition. But let us hope that the expenses on rural projects and infrastructure helps in kick-starting the economy.
By R Prasad, Former Chairman, CBDT