Union finance minister P. Chidambaram in New Delhi on Wednesday. Picture by Prem Singh

New Delhi, Jan. 11: Finance minister P. Chidambaram today ruled out the possibility of any rollback of the fringe benefit tax (FBT), but hinted at simplifying it by removing the “glitches”.

“If there are any glitches in the manner in which the tax (FBT) is administered, we can revisit the matter. Some simplification can be expected in the budget,” the finance minister said at the Forum of Financial Writers here.

Chidambaram, however, evaded the question whether budget 2006 would be a “dream budget”.

“I think to call a budget on the day it is presented, as a dream budget, is very superficial,” he said, adding that such a description should not come on the day of the presentation but one year after that.

The government had imposed the controversial 30 per cent tax on fringe benefits given by firms to employees in its last budget. The government, which has already collected Rs 1,750 crore as fringe benefit tax, intends to collect up to Rs 3,000 crore this fiscal.

Industry captains, in a meeting with Chidambaram earlier this week, had called for simplification, if not complete withdrawal of the tax, which they felt was hindering legitimate business expenditure.

“They (industry) have asked for simplification ... Taxing perquisites is a universal practice across the world and has both horizontal and vertical equity,” said Chidambaram.

He said companies understood this point and they only asked for some simplification in the tax structure.

India Inc is willing to pay higher corporate income taxes in lieu of FBT. Assocham president Anil L. Agarwal and its senior vice-president Venugopal Dhoot said, “The government should levy 2 per cent additional taxes on companies to offset the losses that the government would incur on account of removal of FBT.”

Chidambaram also indicated that the fiscal deficit will be pegged at 4 per cent of GDP in the coming budget ? 0.3 per cent lower than the current budget estimates. “I am obliged to adhere to the Fiscal Responsibility and Budget Management Act (both for fiscal and revenue deficit). That’s what FRBM says,” he said, indicating that the government is expected to cut fiscal deficit by 0.3 per cent to 4 per cent and revenue deficit by 0.5 per cent to 2.2 per cent in 2006-07.

The actual fiscal and revenue deficits are expected to be on target this year. “I think we are on course to achieve fiscal and revenue deficit targets for 2005-06. After achieving this, if we can achieve the FRBM targets, it will mean the economy is maturing and we are having a better fiscal situation,” he said.

The finance minister was hopeful that the economy would continue to be robust. “Growth is a function of investment. If we can boost investment in 2006-07, I am confident growth will be as good as 2005-06,” he said. India’s GDP had clocked an impressive 8.1 per cent growth in the first half of the current fiscal.

On the recent cabinet decision to reduce quota of food grains under PDS, Chidambaram said, “The decision (to cut food subsidy) is on hold pending further discussions with the Congress and other parties in the government and with the Left parties. After the talks are over, the government will take a decision.”

Chidambaram said the divestment programme of non-navaratna companies was on track. “We will monetise small portions of the government’s equity and will take on board the formal position of other parties on this matter,” he said.