The Telegraph
Since 1st March, 1999
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Tax tempers flare up in govt
- BJP leads chorus against proposals

New Delhi, Dec. 28: Economics jostled for space on a political landscape held captive by Hindutva as a chorus rang out within the ruling coalition against some of the tax proposals recommended by the Kelkar committee.

With nine states going to the polls next year, several NDA constituents began piling pressure on the government to ensure that the recommendations are not endorsed in toto. Kelkar, too, tried to allay the fears of the salaried. (See Business Telegraph)

The protests did touch upon the burden on the salaried class, expected to be hit the hardest by the committee’s income-tax proposals, but the firepower was concentrated on a lukewarm suggestion to milk a political holy cow: agriculture income.

Key political players in India’s northern food-bowl states kept up a steady stream of warnings throughout the day against any move to tax farm income, culminating in a call by the Shiromani Akali Dal, a BJP ally, for a “special meeting” of the NDA to discuss the issue.

In the final report, the Kelkar panel has retained its earlier proposal that farm incomes be taxed. But the panel added that this can happen only if the states agree to do so — which effectively means it is unlikely to happen in the near future.

The government, too, has not yet given any indication that it would accept the proposal for farm income-tax — a political hot potato at all times — but the allies are aware that the issue could be turned into a lethal weapon if the Opposition chooses to make it a campaign plank.

The BJP today took the lead in trying to pre-empt that possibility.

“The panel has recommended that tax rebate on savings should end, but our government would like to encourage savings and cannot agree to anything that would hurt the salaried class. Our government would also in all probability continue with standard deduction (a fixed amount that the salaried claim as tax-free income),” BJP general secretary Rajnath Singh, who chaired a party panel appointed to study the report, said.

He said the suggestion of bringing income from agriculture within the tax net would never be accepted by the government.

“Nobody’s financial interest should be hurt. This is what the Prime Minister is concerned about and, hopefully, the finance minister also thinks on the same lines. It is not necessary for the government to accept the Kelkar panel’s recommendations,” Singh said.

The former Uttar Pradesh chief minister also expressed unhappiness that the panel did not incorporate the BJP’s suggestions as much as the party expected.

However, officially, the BJP reserved comment. The party’s chief spokesman, Arun Jaitley, said the BJP was yet to make up its mind on the recommendations. “We need to formulate our views after a detailed study of the report,” he said.

But Union agriculture minister Ajit Singh, known for his clout in the farming heartland, did not mince words as he played to his constituency.

“There is no need, no reason and no justification to impose tax on non-farmers having agriculture income. It is practically quite difficult to ascertain farm income as agriculture is affected by so many factors,” he said. “If the intention is to check cheating by non-agriculturists having farm income, it is the duty of the income-tax authorities to do so,” Singh told PTI.

Shiromani Akali Dal general-secretary Kanwaljit Singh warned that if the panel’s recommendations were implemented without taking the allies into confidence, his party “will vote against these in Parliament”.

Haryana chief minister Om Prakash Chautala, another BJP ally at the Centre, said income-tax on farmers would not be allowed at any cost. The Samata Party, already upset with the divestment policy, also opposed some of the tax proposals.

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