News: Govt to eventually phase out tax exemptions

(PTI 03/05/2007) New Delhi - Taxpayers may fiercely defend it, but tax exemptions have to be pruned and eventually phased out, Finance Minister P Chidambaram said on Thursday.

"Given the commitment of the UPA government to inclusive growth and given the need to finance social sector expenditure, the need for resources is growing every year," he said, replying to the debate on Finance Bill in Lok Sabha.

He said: "I have a duty to raise resources" and added that tax exemptions were a legacy issue that needs to be looked into.

"Tax exemptions have been given over the years and there is resistance -- sometimes fierce resistance -- to any attempt to prune the tax exemptions... Nevertheless, I have made an attempt to prune some exemptions...," Chidambaram said.

At the same time, he also promised to review the controversial Banking Cash Transaction Tax (BCTT) next year.

Referring to the demand of Left parties to tax rich people, the Finance Minister said tax-GDP ratio has increased from 9.2 percent to 11.5 percent during three year's of the UPA government.

"For 2007-08, I have projected a tax-GDP ratio of 11.8 percent," he said, adding that gross tax revenue at Rs 4,71,742 crore in 2006-07 exceeded the budget estimates by Rs 29,589 crore and the revised estimates by Rs 3,894 crore.

Government will initiate measures to increase tax-GDP ratio by undertaking major tax reforms that expand the base of tax payers, increase tax compliance and make the tax administration more efficient, he said.

"Government will faithfully adhere to the NCMP. It will keep tax rates stable and moderate and create an environment that will be conducive to greater investment and growth," he said.