PM hints at fewer tax exemptions

New Delhi: The Prime Minister has hinted at a re-look at tax exemptions and a policy for the rehabilitation of displaced farmers in the forthcoming Union Budget, which is likely to focus on the power sector and offer some incentives for imports in the form of a cut in import tariff.

Outlining his government's economic priorities ahead of the Budget, the Prime Minister told the Annual General Meeting of FICCI that he favours a "liberal but equitable" tax regime with fewer exemptions. "In the long run, our tax regime should not have too many exemptions and they make tax administration an unnecessarily complex exercise vulnerable to misuse," the PM said.

Expressing concern over what he called 'irrational exuberance' at the stock exchanges, the PM said his government's priority is to ensure stability of the booming capital markets. The PM hinted at steps to control inflation and maintain fiscal discipline, while ensuring that the rate of investment is sustained for maintaining growth rates.

He also dropped hints that the government is ready to move towards a common GST or General Sales Tax and better harmonisation of Value Added Tax.

Voicing his concern over the unrest among the farmers community over land acquisition for SEZ and other industrial use, the Prime Minister said the government will finalise a new Rehabilitation Policy for farmers within the next three months to deal with the issues.

"There is no reason why spread of industrialisation should be a contentious process. Issues such as land acquisition and displacement of people and their rehabilitation should be addressed transparently," the PM said. He said the proposed policy would be more progressive, humane and conducive to the long-term welfare of all stakeholders.

The Prime Minister said the tax rates should not only be liberal but also transparent. "It (tax regime) should be transparent and not subject to administrative discretion. I have a great faith in inherent honesty of our people and we must respect that and build on that. When there is transgression it must be visited upon by predictable action," he added.