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Mitra’s Nobel example

Amit Mitra and Joseph Stiglitz

Calcutta, June 17: Finance minister Amit Mitra today referred to Nobel laureate economist Joseph Stiglitz in an attempt to justify the Mamata Banerjee government’s decision to impose entry tax in the state.

“Joseph Stiglitz had not only said markets are imperfect but they are incomplete…. Funds raised through entry tax are being utilised for market connectivity, building infrastructure…. We have already distributed funds for such projects in North 24-Parganas, Howrah, Nadia and other districts,” Mitra said in the Assembly today in reply to a question by the CPM leader of Opposition Surjya Kanta Mishra.

Mishra asked if there had been any increase in the revenue generation through entry tax in the 2013-14 fiscal compared to 2012-13 and, if so, how much.

“During the fiscal year 2012-13, the figure was Rs 1283.72 crore, while in 2013-14, it came down to Rs 999.58 crore,” said Mitra, attributing the loss in revenue to the ongoing legal battle between the state government and some companies.

An incomplete market is one where some of the necessary conditions for market formation exist, but not all of them.

Economist Stiglitz has strongly advocated for government intervention in utilisation of resources since the free play of market does not necessarily imply equal distribution of resources.

“He quoted Stiglitz on market imperfection but the question remains whether Stiglitz would speak in favour of a taxation policy as regressive as the entry tax,” said Mishra.

Congress MLA Sukhbilas Barma also described the entry tax as “obnoxious” on the floor of the Assembly today.

The state government’s decision to introduce the tax had been criticised by economists and trade bodies. The taxation process was considered “regressive” with the potential to trigger inflation.

The West Bengal Tax on Entry of Goods into Local Areas Bill, 2012, met with legal hurdles after nearly 30 companies, including Tata Steel, Bharti Airtel, Usha Martin, Hindalco and Emami Biotech challenged the constitutional validity of the tax.