Yashwant Sinha, the chairman of the parliamentary standing committee on finance, which will scrutinise the Direct Taxes Code Bill, is against removal of tax exemptions, saying some of them contribute to economic growth. ?I am not in favour of removing all exemptions …Some exemptions were needed for the growth of the economy,? Yashwant Sinha said on Tuesday. Sinha, who presented five Union Budgets as finance minister in the BJP-led NDA government from 1998 to 2003, said exemptions should, however, have sunset clauses and should be removed when they outlive their utility.
The Direct Taxes Code Bill, which was introduced in Parliament towards the end of the Monsoon Session, is being referred to the parliamentary standing committee headed by Sinha. The Direct Taxes Code is scheduled to be implemented from April 1, 2012.
Sinha said he had reviewed the exemptions ?very closely? in 2002 as part of the Budget exercise, when he was the finance minister. Some exemptions were needed to push growth and encourage fledgling industries, he said, adding that the exemptions are needed at a particular period of time and under certain circumstances. ?Circumstances change, and the needs of the industry change too, and hence all tax exemptions should have a sunset clause,? Sinha said.
Sinha added that he is against replacing tax exemptions with subsidies as an instrument of removing regional or sectoral disparities. ?All over the world, taxation is used as a tool of government policy? to remove certain distortions in the society or promote certain segments, regions and industries to push economic growth, he said. US President Barack Obama also has used taxation as a tool of government policy, he added.
Important bills are re-introduced in Parliament by the government after incorporating recommendations of the standing committee, which has representatives from various political parties. The government also can reject the recommendations of the standing committee.
When asked whether the 400-page Direct Taxes Code has attempted a simplification of tax laws, Sinha said the parliamentary standing committee has not yet gone through the Bill. Until the Bill is reviewed by the committee, no comments can be made, he said. Sinha, however, said he was in favour of simplification of tax laws and procedures.
During his term as the finance minister, Sinha had introduced ?saral? income-tax return forms. ?All tax laws, procedures, tax forms should be simple,? he said adding, the ?saral concept was started by me.?
The rationale behind introducing the new tax code is that the Income Tax Act has become archaic, with so many amendments over a period of time, Sinha said. ?There is a need to codify (the tax law) afresh and it is also an opportunity to remove all those clauses that have outlived their utility and simplify the tax law, keeping in mind the equity of tax burden,? he said.