|Finance minister P. Chidambaram with RBI governor Y.V. Reddy in New Delhi on Saturday. Picture by Prem Singh
New Delhi, March 4: Finance minister P. Chidambaram today asked India Inc to pay up their taxes gracefully instead of seeking exemptions.
“Personal income tax paid by the masses is significant but not large enough. As in the past, future revenues must continue to come from the corporate sector because the corporate sector earns the maximum revenue. You must continue to be profitable .... we will tax you. This is because you are the only sector which can be taxed,” the finance minister said in his post-budget meeting with industry captains.
Speaking at a discussion organised by the Federation of Indian Chambers of Commerce and Industry (Ficci), the finance minister pointed out that the effective tax rate for the corporate sector works out to 21-22 per cent.
A majority of companies pay tax at a lower rate as MAT (minimum alternate tax) companies ' for the purpose of MAT calculation, 30 per cent of previous year’s book profit is considered as the income for the assessment year ' can take credit of the tax payment over the next seven years.
He said, the budget did not have any proposal for new taxes and there was no change in the structure of taxes.
“All that has been done is tweaking a few items here and there to remove the clutter that surrounds the tax structure,” he said.
“All I can do is to assure you that we will create an environment where your businesses prosper and you make profits,” the minister said. “I will help you achieve your growth targets and investment plans. I will address all issues standing between you and a 12 per cent growth in the manufacturing sector,” he added.
“With growth there is a chance of addressing the problem of poverty. Without growth there is no chance,” Chidambaram said.
Justifying restoration of long-term capital gains on companies paying minimum alternate tax (MAT), the finance minister said, “MAT companies still pay only one-third of the tax paid by a normal profitable company.”
“MAT companies unwittingly got the exemptions ... we should put this discussion to close,” Chidambaram said, adding why should any profitable company not pay tax' The minister also pointed out that by definition, a MAT company is a profit-making company, not a loss-making one. He said, “MAT is only an advance tax ' an advance payment of the liability the companies will incur in future.”
Meanwhile, the finance minister also dismissed the idea of withdrawing capital gains tax on securities of unlisted companies saying that “the long-term capital gains are taxed world over and the sale of property and other immovable items continue to attract tax”.
“Only shares listed on stock exchanges are exempt but they attract securities transaction tax,” he added, referring to the investment flows coming through tax havens like Mauritius and Singapore.