Hoping Against Hope ; the Promised Tax Cuts May Not Materialise in Budget 2008-09.

Business Today › February 11, 2008

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Hoping Against Hope

The promised tax cuts may not materialise in Budget 2008-09.

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Hoping Against Hope ; the Promised Tax Cuts May Not Materialise in Budget 2008-09.

By Shalini S. Dagar

READ MY LIPS; NO NEW TAXES," SAID GEORGE H.W. BUSH, FATHER OF THE incumbent us President. Many believe that one statement won him the 1988 presidential race and ensured his place at the White House. Just short of an election year (if the government lasts its full term, and it seems it will, Finance Minister P. Chidambaram will get a chance to present a vote-on-account next year), does the same economics have a chance of working in India? Chidambaram has been very consistent with his stance on taxes over the last few years-- if there is increased voluntary compliance, there is a case for moderation in rates.

Well, compliance has been improving over the past few years, both due to reasons of strong economic growth as also more stringent tax administration. Now, the compliant seek the promised carrot. As the Budget process got underway in the first week of January, there has been a build-up of expectations of tax concessions in the coming Budget. But the Finance Minister has tried to temper this sentiment. Yet, for the compliant, tax-paying middle class, there is clearly a case for some relief. Salaries may have risen but so have outgoings, whether through additional levies such as the education CESS, or service tax on a phalanx of services. "There is surely a case for reduction in the tax incidence on individuals, which is already quite high," says T.K. Bhaumik, Chairman (Economic Affairs), ASSOCHAM. Income tax on individuals is a component of direct taxes, the other major chunk of which is corporate tax. Till mid-December, direct tax collections grew 40 per cent over the figure for the corresponding period of the previous financial year. Indirect taxes (mainly service tax and customs and...

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