January 7. There is, however, an equally strong view that higher tax rates would reduce compliance and might not yield any net gain for the government. All industry chambers have vehemently denounced the proposal to increase tax on the super-rich while there have also been some voices from corporate India in favour of the proposal like that of Wipro founder Azim Premji.
Private listed companies had paid dividends close to Rs 60,000 crore to promoter groups in 2011-12. If a proposal to tax dividends in the hands of (very rich) recipients is implemented (currently there is a dividend distribution tax of 15% which the firms deduct), this could be one chunk that could be brought under the new impost.
India taxes personal income under three slabs – 10%, 20% and 30% – and education surcharges on these rates that make them slightly higher.
Chidambaram believes the the burden of fiscal correction must be shared fairly and equitably by all stake holders. “The poor must be protected and the others must bear their fair share of the burden,” he had said after taking charge of the finance portfolio last August. Clearly, the minister does not intend to spring a shock to the common man in his next budget, but may rather be inclined to make the rich pay more. In fact, the message many got from his four-nation investor meet earlier this week was that India's fiscal consolidation attempts lay emphasis on increasing revenue by simplifying tax procedure, not by raising tax rates. There may be spending cuts in the short term, but in the longer run, economic policy overhaul would spur growth as well as revenue. Chidambaram said fiscal prudence will be a key part of his budget.
Chidambaram estimates the GDP to grow at 8% in 2013-14, after a 6-7% growth this fiscal.
He said the forthcoming union budget would not be scripted keeping in mind the 2014 general elections. “The election is a good 14 months away from the budget. The budget will be a responsible budget,” he said.