Speaking on future course of taxation, Acharya said that the issue of taxing the trade through electronic means has to be handled immediately as the sheer quantum of trade is expected to be significant. He also said that the state governments should take the lead in introducing value added tax (VAT) system rather than waiting for the Central government to alter the constitution which in the current situation does not look politically feasible.

He said that the nineties was a good decade for tax reform and major changes have taken place both in direct and indirect taxation. In indirect taxes, customs duty has been reduced from over 150 per cent in early 1990s to the current peak rate of 40 per cent while excise rates have been simplified to just three slabs.

In direct taxes, the highest personal income tax slab has been brought to a low level of 30 per cent and corporate tax to 35 per cent. Apart from these efforts are on to widen the tax base, he added.

Acharya said that India will have to reduce the import duties further to make it on par with Asean countries as it would motivate exports, make domestic industry competitive and also ensure that public get products at a competitive price. On personal taxation, he said that there is no scope for further reduction in the next few years.

Earlier making a presentation, Parthasarthi Shome from ICRIER stressed the need to move away from income-based taxation to consumption-based one. He said that over 105 countries have embraced VAT and is functioning well.

He also pointed out the need to reduce capital taxation as is happening in rest of the world due to increasing mobility of capital. He gave the example of how Latin American countries had successfully adopted these concepts.

L Ganesh, chairman CII (southern region) and Isher J Ahluwalia, director & CEO, ICRIER also spoke on the occasion.

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.