Derek O’Brien’s speaks on The Finance (No.2) Bill, 2014 | Transcript

My colleague who spoke on the budget debate of the Trinamool congress made 5 broad points, I do not wish to touch on any of those points today and instead focus our comments, direction and suggestion on the finance bill. The 5 broad points made by us in the budget’s debate was one to seriously consider the recommendation of the finance commission which recommended that there were three debt stressed states of Punjab, Kerala and Bengal. Two, the 2nd point we made is that the debt moratorium for Bengal for fiscal imprudence which has since changed to fiscal prudence.  The third issue we raised was a big issue of black money, fourth was of sharing of taxes between the state and the centre and fifth all our focus there in the speech was about 33% of in India, the poorest of the poor. In the finance bill we will restrict most of our comments to the middle class. A hundred sixty million a few years ago will become as per estimates two hundred and seventy million in one or two years. 270 million equivalent to the population of Brazil and UK put together. This middle class is typically is divided into two broadways, the seekers who earn two lakhs plus and what they call the strivers a little more than that.  And I think in this budget if you really look at it we were trying to put it in a mathematical formula, this is what the formula looks like PC = AJ = 4.1. Now this basically means, first let me dwell on 4.1, Congress a few months ago came up with a 4.1 fiscal deficit no., the current government has stayed with the no.and this has been an opportunity if that no. had not stayed with and this was a great chance to take some of the stress away, some fiscal space provided so that the middle class could be benefitted because the middle class has been suffering double digit inflation in last 6-7 years and in last 2-3 years total absence of job. Maybe the Finance Minister in his wisdom did not want to go with 4.1 because he thought the markets would tank, credit rating agencies would down grade us, corporate would find it very difficult to raise money from abroad.  However, this was a golden opportunity lost because as I said if PC=AJ=4.1, eventual winners were babus of north block.  Now to get to some specific proposals;

First one, Service Tax – Service Tax contributes 60% of the GDP, I will make 5-6 points in the time service tax contributes 60% of GDP, 12% approximately of direct tax, very good.  Some people are left out of service tax.  We do not want to grudge those people like

those indulging / pursuing in arts, culture, sports, they are out of the service tax net fine…quiz masters have to pay also what to do…but on a more serious note, Sir, the former Prime Minister, former former Prime Minister had not exempted lawyers.. now I have lots of lawyer friends who wouldn’t like this, but when the previous, that’s why my formula works PC= AJ, lawyers got exempted and again lawyers have been exempted of this service tax so large legal companies are not paying service tax.  Chartered Accountants are paying Service Tax from Oct 2008, so our first clear suggestion is  large law firms,  diagnostic firms, huge diagnostic firms are not paying service tax, please bring them into service tax.

2.  Our 2nd observation, again this is the PC=AJ syndrome which you can also express in a boring way Congress = BJP syndrome.  Lets look at another no. this is for super rich surcharge – Trinamool congress believes  yes someone making over one crore of money and you have levied a surcharge on that one crore 10% surcharge, good, previous Finance Minister did it but this is  where we have an issue, the previous Finance Minister gave us an no. 42800 people across the country are earning a more than one crore so you levy the surcharge.  This time it was continued, Sir, 42800 people there are more people than that in south extension, west andheri who are earning more than one crore. Please seriously look into this no. as this no. can go 4-5 times over than this.  Sir, three quick points on personal tax, as I said we are restricting all our comments today on the finance bill and not giving you some broad ..ahh…macro picture which we finished in the budget.  On Income Tax 2 to 2.5 lakhs you have raised that too and to 80CC exemption 1 to 1.5, so the approximate savings on Income tax in this bracket will be 5000 rupees however if the BJP themselves take a look at the standing committee recommendations of Yashwant Sinhaji there itself the standing committee talks about three lakhs, the first one taking that upto three lakhs and taking the 80cc to two lakhs, we are optimistic  that you did not address it this time, maybe February March, will be when middle class India is looking upto you.  Interest on borrowed capital up from 1.5 to 2 lakhs very welcome, quick point here, tax on debt

oriented funds, Tax on debt oriented funds how did it work before this if you had it for 12 months you did not have to pay capital gains fair enough, now that no. has become not 12 months it has become 36 months ok we like something here, we don’t like something here, what we like is the fact you have taken it upto 36 months for some corporates will be misusing this 12 months to avoid capital gains…if you want to penalize the corporate for doing that you might want to, but you either have two options here, don’t penalize the individual who is using this, so the option maybe if the individuals are allowed to pay this and give them the benefit of capital gains in 12 months or you set a cap.

3. Next point Sir, Corporate Social responsibility we have a quick point here… 2% of corporate social responsibilities, large companies earning more than 500 crores now you are not going to make that 2% tax free , good, what happens and this is a key point, what happens to those companies not meeting your company act, specifications, smaller companies, a company earning 1 crore, 1.5 crores, they want to make a contribution, maybe 5 lakhs 10 lakhs, I think, we are putting them off if we are going to tax that…please consider, go ahead with your 2% tax for the big guys but you know some companies want to give 10 ambulances, 4 pumps, he is making a profit of 10 lakhs or he is not even making a profit, please consider this, do not tax that corporate social responsibility because people will be discouraged to do welfare.

4. On Indirect Taxes, a quick point on indirect taxes, now central excise and service tax, if you want to make an appeal, a pre condition on appeal was not there and now you have a pre condition for an appeal saying that to make that appeal you have to pay 7.5 or 10% upfront cheque. ..this is dangerous, because this is dangerous, this will make income tax officers, there are many honest officers around, this will make them feel a kind of greedy so don’t put that condition.

Sir my last two points, we make these broad comments some specific comments, broad comment on tax and that is tax culture, we would like to leave you with a thought that you

know that there has to be a change in the perception the way we pay our tax otherwise you know taxation today is still seen as a fear psychosis, I know in 1970 if you earned 10 lakhs 9.70 go in tax, today if you earn 10 lakhs only one lakh 25 thousand goes into tax, very good.  But there has to be a tax culture, you need to reward high profile tax payers, you need to reward corporate and you need to make a big shu sha about it, you all are very good in running advertising campaigns, big ones which works successfully I will agree, please look at this tax culture and remove this fear psychology .

The last point Sir, if you are looking at models we will tell you one model to follow because no model is better is the one where the nos work; one state in India tax collection in 2011-12, the tax collection was 22,000 crores, 2011-12 22,000 crores, 2013-14, from 22,000 crores, 2013-14 the figure is 40,000 crores, the increase is a whopping 87%. You ask me which state,87% increase in the state of West Bengal under Mamata Banerjee’s government inspite of the all the media bashing and the fiction lots of great work is happening there including this tax collection, two ways we managed to do it for the state one e-taxation, two better compliance..this is work in a state and I am sure if it is put to work in the centre..thank you…