Revamp FBT, cut customs duty, simplify the tax structure, spend more on infrastructure, these are some of the expectations India Inc has from the Finance Minister. They also want the government to widen the tax base, curb government expenditure and open up more sectors for FDI.
Here is what Raman Roy of Spectramind fame, Rahul Bajaj, Shanti Ekambaram of Kotak Mahindra Bank and Malvinder Singh had to say.
What is the expectation from the Budget?
Roy: The Indian corporate expects the reforms that have already been done, to be taken forward. We found that expectations are there but the intensity of the expectations that we found in the previous Budget was somewhat lacking. Because FM have to consider various aspects before he goes ahead with the reforms.
The way the economy is performing, the Corporate India is performing very well and they are just hoping that they can get by without the help of the FM. They are looking for the simplification of the procedures more than anything else. They are not looking at reduction of corporate tax rates.
Would Corporate India be ok, if the cesses and levies was done away with and you went in for a higher corporate tax?
Singh: As far the expectation on the taxes go, I think a great rationalization would be important, a simplification would be important. Certainly there is a great expectation that the fringe benefit tax rationalisation will happen.
That there will be concessions related to R&D expenditures, particularly in pharma sector and all other sectors. The expectation is not so much on sharp reduction in taxes as much as rationalization and simplification of taxes.
The fact that there is a levy on education and education cess, it should be more taken from the perspective of creating a focus around education and making sure whatever is collected from that cess actually goes to education.
The fundamental question to ask is, the government already spend a lot of money both on these social sectors, health and education.
The important thing to make sure is that whatever money is already being allocated to these sectors actually delivered by way of producing the services that they are supposed to deliver on.
If one looks at the efficiency of government spending in these two sectors, I think there is much that can be done to clean that up before any additional cess is put on.
According to the survey 56% of the polls expect an introduction of social securities schemes and we have some already announced last budget- what kind of balancing act do you expect the FM to pull of this time?
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Bajaj: As compared to last year; the total expenditure and total revenue keeping in mind that the economy is growing at 8%. There are employment guarantee schemes and Social security schemes would come in as the FM and PM deem fit but keeping in mind this FM and PM, I would not have normally have worried about too many things but with the pressure of the left and their list of ways in which one can raise more revenues that is the danger spark and if FM and the government have to suck up to that then something unfortunate may happen and we would go back in the reverse gear.
While there is very little difference between wish list of industry and whatever we expect; whatever we wish we say we expect:
- I think there would be no increase in direct taxes
- neither would there be any significant need for reduction
_ this cess should continue as they are
- there is no point in adding it to the corporate tax because unless the total effective tax becomes lower then we would welcome it otherwise I would rather have a cess, which can go away tomorrow expect for FBT, where all of us wants its abolition or we are prepared to pay a 1-2% high corporate tax so that the government doesn’t get lost or at the least give us a choice whether we want to continue paying FBT or slightly higher corporate tax.
According to survey - 29% expect conveyance, tour and travel either be excluded or diluted and 27% expect Super Annuation contributions to be either excluded or diluted or 24% sales promotion to be either excluded or diluted - so consensus being that things maybe modified and not abolished.
Roy: This survey says this given the fact that this will continue but most of our replies were if given a choice FBT should be abolished, so if it is to continue then they consider that super annuation should be considered and conveyance, which is a business expenditure should be looked into and again for example IT has higher rate qualifying as FBT, they should not be distinguished as compared to IT industry.
Regarding STT- (Securities Transaction Tax) 44% expect it to be hiked- so what do you expect and if that where to happen what impact would that have on the capital markets?
Ekambaram: I do not expect the STT to be increased at all and I agree with most people that the FBT needs to be rationalised or done away with and ideally increase the corporate tax rate.
In fact, I think there should be one tax that is STT and Service Tax rolled into one for the securities market.
Roy: I would like to add that even if there is an increase in corporate tax, there are a lot of companies, who do not end up paying taxes because of the tax holiday or tax incentives, so the whole idea was to get those companies also into the tax net and going by the collections that have happened, it has been a good move as far as revenue is concerned.
I think fundamentally one cannot say that we will give tax holidays from the front door and take them away from the back today. There is an element of what we as a country commit to somebody, who is investing in the country and these back door policies, have to be abolished.
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