The Finance (No. 2) Bill deals with the taxation proposals of the government but as per the rules of the House any on the motion that the Finance Bill may be taken into consideration the member may discuss matters relating to general administration, local grievances within the sphere of the responsibility how government of India monitorial financial policy of the government. So I am first dealing with one or two points outside the ambit of the Finance Bill.
Firstly, I mentioned in this house the demand of West Bengal Government for a moratorium on the interest payment on the outstanding debt of the state government. Like the previous Government the present Finance Minister had said that only the Finance Commission will be able to decide on that. May I make a plea to him again to consider the demand of the government of West Bengal for a moratorium on interest payments.
This morning Sir, Sudip Bandyopadhyay, our Member, mentioned the plight of the sick tea gardens. 6 tea gardens are closed, the Chief Minister has written to the Commerce Minister and it is necessary for Government of India to intervene and take proactive steps to open the tea gardens. May I reiterate the demand of the state government again. May I also point out the Jute Industry which is the biggest industry in west Bengal employing two lakh workers and which involves 4 lakh jute farmers is in very bad shape due to the dilution of the mandatory order for jute packaging which was done by the previous government and which is being continued by the present government. I would request the Finance Minister to consider withdrawal of this dilution of the mandatory packaging specially in case of food, fertilizers and sugar so that the jute industry which involves such closely can survive.
Sir, the other point I want to make is that the Finance Minister has presented the Finance Bill and since he presented the budget we are listening to many of his speeches. He has said in one speech that he is the worshipper of the deity of growth. We are not against growth but we believe in growth with social justice. Pursuing growth alone will leave the millions of poor people unfed. I would request the Minister to please change his approach and not go after growth only. Also I would like to mention that as a party we are opposed to Foreign Direct Investment in certain critical sectors which include defense, which include insurance and we had opposed in this house after we left the government FDI in the retail sector to safe the livelihood of millions of small traders. I would request the Finance Minister to reconsider government’s approach for allowing Foreign Direct Invest in this very vital sector.
Having said that let me come to the taxation proposals of the present government. Any government Madam has to levy taxes so has the present Finance Minister. The expenditure of the central government has come to 18 lakh crores, now the Minister is trying to raise resources to meet this expenditure. How is he doing that? He is doing that levying taxes. What are the percentages? He will get 13% from the direct taxes, 10% from excise, 9% Customs, 21% from corporate taxes and 24% of this total expenditure he will be borrowing. Now I will go later into this, he has not tinkered much with the overall percentage. It’s the same percentage with Mr Chidambaram’s budget laid. What does the Finance Minister do with the Budget? Why are the people interested? Because the Finance Minister, apart from the expenditure proposal, does give relief to certain section of the people through the Budgetary proposals which he has done. He has given income tax relief to the middle class people from Rs 2 lakh to Rs 2.5 lakh. I always felt that a little more relief would be welcomed if he raised this limit to Rs 3 lakh. He has also extended the limit for Senior Citizens like us from the present figure to Rs 3 lakh. I would request him to increase that from Rs 3 lakh to Rs 3.5 lakh. He has also given some relief for encouraging certain activities; there are two reasons that he is putting Rs 5000 more in the hands of the ordinary tax payer. His hope is that some of it will come into savings and raise the savings rate. The other two good steps he has taken are for self owned houses: he has raised the relief on investment from Rs 1 lakh to Rs 1.5 lakh. On Public Provident Fund, the ceiling has also been raised. Both these are welcome as these are reliefs and increase the savings.
Sir, the Finance Minister also gives excise reliefs to certain sectors. We request him to extend them to certain industries to that they can do a little better. Also he reduced customs tax for import of certain raw materials for essential industries so that these industries get some relief. Soaps, deodorants, cosmetics will become cheaper; he has given much importance to personal hygiene. Also packed juices, tinned fruits and tinned meat have become cheaper. Footwear below Rs.1000/- which is worn my poor people like us has become cheaper, which is also welcome. Also the cathode ray using TVs have become cheaper, this is used by poorer people in the rural areas, which is a good thing. Personal computer, LED, LCD TVs below 19 inches will become cheaper. This is again a welcome step as it will strengthen the hardware manufacturing capacity in this country. Now the Finance Minister has also enhanced his tax net. Naturally he has to look for sources to earn more revenue… he has to pay for Sardar Patel’s statue, he has to pay for certain spiritual augmentation like Prasad, all that pressure is on him and so he has to enhance his tax rate and so he has to bring more items in his service tax net. One of them, Madam, is the travel by AC Buses and the other is advertisement on the mobile or internet. They will now become costlier; these are good steps as he has increased his tax net in the service tax matters.
He has also done one clever thing. Foreign People who are investing in share markets in India, they were avoiding paying tax here. What he has done around 1/10th of the foreign investors were claiming their securities transaction were part of their business that was taxable as business income and they are further claiming exemption from this under double taxation agreement entered into by their country and India. These investors now have to pay capital gains tax under profits of securities transaction. This is also welcome; you brought them into the tax net. He has also said that there will be no reprieve for foreign investors routing their investments through off shoot tax heavens such as Mauritius or Singapore. They were earlier claiming exemption from capital gains tax, through double taxes avoidance agreement. Now these people have to pay tax on capital gains which is again I say is a welcome step. But now instead of talking about these small tinkers the taxes the Finance Minister has done, I also would like to mention one important thing for our state. In reply to my question in this House he replied in detail on the goods and services tax he wants to introduce by the end of the year. But the concern about the state government on the revenue loss has to be looked into properly. The reduction in central sales tax at the Center’s direction resulted in a loss of Rs 4300 crore to West Bengal exchequer as the promised compensation was not given.
The dialogue about GST should continue unlit the state’s legitimate concerns are made. So this is the other point. Let me tackle the broad view of the taxation policies of the government. Having said all that I wanted to say about my State. Let me comment on the broad world view of taxation policy of the government. Now what we find that the union government’s total expenditure in GDP ratio has seen a sharp drop from 15.7% to 13.9%, farther shrinking the fiscal policy space available to the government. Two, no comprehensive road map has been presented to step up the country’s tax to GDP which is at a low level of 17%. If I may mention that the tax to GDP ratio in OECD countries is 33.8%. In Brazil it is 33.2% and in India it is 16.3%. So there is no effort to raise the tax and the GDP ratio. There are no measures to adverse the lack of progressivity of country’s tax structure which depends on the indirect taxes to the extent of almost two third of the total tax revenues.
I have mentioned this point earlier. We need a progressive tax structure that will tax the rich more and reduce taxes on poor. Now indirect taxes apply to everybody, rich and poor. Direct taxes directly tax individuals. If you look into the figures, in no advanced country of this world is the tax system so retrograde as in our country. If you see India’s direct tax revenue as a proportion of the tax revenue, at 37.7% it is far below than the G-20 average of 50%. In developing countries such as South Africa it is 57.5% ; in Indonesia it is 55.8%.
There are the surcharges introduced by Mr Chidambaram on income tax in super rich to last year. We are against surcharges because the state does not appreciate but you have continued to neglect progressive property tax reforms such as reintroducing inheritance tax and reforming wealth tax. Madam, the main shocking thing is that this government comes out in this book called estimate of revenue foregone and the estimated revenue foregone says that the total revenue foregone due to all kinds of exemptions in the central taxes is projected to be Rs 5.73 lakh crore that is the amounts the big companies are getting as exemption. And this is equivalent to 5% of the GDP. The budget proposal, does not have any strong measures towards reducing the amount of tax revenue foregone due to the plethora of exemption in the central tax system. We are afraid to tax this super rich we are afraid to tax big corporate. That’s why I always say that the philosophy of the present government should be a little inclined towards so called growth and a little inclined to the corporate which I do not appreciate.
Madam, we are talking of reducing black money. Now this budget does not mention any steps to strengthen the administrative machineries of various agencies required to address black money related issues. Staff for shortage in such agencies are that 30,000. How will you recover that black money? They don’t have staff; similarly central board of direct taxes has estimated the staff shortage at 30,000.
Madam, there was a lot of controversy on retrospective tax amendment which was introduced by Pranab Mukherjee as finance minister. The corporate world was very much against it. But let me remind the white paper of black money published by the ministry of finance in 2012. Please it should be noted that the Vodafone tax case was an instance of misuse of corporate structure for avoiding the payment of taxes.
Again in this background the retention of retrospective amendment is welcome. Here announced the finance minister that all cases arising at the retrospective amendment will be further reviewed by a high level committee. Not many corporate will support you on this but I support you on this. Vodafone should not get away. The money must come to India. Mr Nishikant Dubey almost sounded like the spokesman of the corporate when he said that the minister has put this by mistake. Madam, it is the sovereign right of the Government of India to have retrospective taxation and catch the people.
So I want to say that the focus of the government should shift from growth to social justice. The focus of the government should shift from placating the corporate to catching them and it should be more effective in recovering taxes in the interest of the poor.
