| Chidambaram with industrialists at the pre-budget session in New Delhi on Friday. (PTI)
New Delhi, June 4: India Inc today pressed for a reduction in the corporate tax rate to 30 per cent from the existing level of 35 per cent, imposition of the highest marginal rate of income tax at 30 per cent on incomes above Rs 10 lakh against Rs 1.5 lakh at present, and wanted the government to target divestment proceeds of Rs 25,000 crore this year.
In a presentation made to the finance ministry as part of the pre-budget consultations that began here today, India Inc said the exemption limit should also be raised to Rs 1 lakh from the current level of Rs 50,000.
Finance minister P. Chidambaram is understood to have indicated that the government is willing to lower taxes if exemptions are phased out as part of efforts to spur investments and growth.
Industry shoguns said the government should aim to have 15 crore individual tax-payers against 3.3 crore at present.
“The tax base should be widened. More tax-payers should be added,” Federation of Indian Chambers of Commerce and Industry (Ficci) president Y. K. Modi said after a meeting with Chidambaram at North Block.
The industry barons said the corporate tax should be reduced to 30 per cent with the eventual objective of bringing it down to Asean levels of 25 per cent. They also said the tax rate should not be raised through the levy of any surcharge or cess — a ploy that every single government had used in some form or the other since the mid-nineties.
The industrialists who attended the meeting included Nusli Wadia, Jagdish Khattar, Venu Srinivasan, Y. K. Modi, Anand Mahindra, . Srinivasan, Suresh Neotia, V. . Dhoot, A. G. Piramal, Ashwin Dani and Rafeeq Ahmed.
Venugopal Dhoot of Videocon made a strong pitch for tax breaks to spur investment in Bengal. “For expanding new industries in Bengal, the central government should extend the excise benefits which are given to the industries of the north-eastern states. I am not advocating this from any political point of view but in the interest of industrial growth in the country,” he said.
The industrialists said a climate should be created to ensure an even higher growth of 10 per cent and pressed for a liberal regime to step up FDI by three-fold to $15 billion annually.
Modi said to attain 10 per cent GDP growth, the rate of expansion should be 4 per cent in agriculture, 11 per cent in industry and 11 per cent in services.
Chidambaram was urged to bite the bullet by removing protection to the two holy cows: rich farmers and public sector companies.
They wanted the government to tax agriculture income above Rs 5 lakh at a flat rate of 15 per cent and raise the targets for divestment to Rs 25,000 crore from the actual levels of around Rs 16,000 crore that the NDA government earned in 2003-04.
They suggested that divestment up to 74 per cent should be permitted in all non-strategic profitable public sector companies — a suggestion that is certain to be scuppered by the government which has already conceded the Left’s demand that the government should retain full control over state-owned units.
Industry also suggested that all loss-making PSUs should be privatised and that privatisation/divestment in strategic profitable state-owned companies should be allowed up to a level of 49 per cent.
They also wanted the enactment of a flexible labour law for new units that would allow replacement of “non-performing workers with willing workers” — another demand that is viewed as an anathema by the Left and the trade unions.
Several suggestions were also made in the area of indirect tax reforms: a 16 per cent ceiling on Cenvat, the implementation of a national value-added tax (VAT) with a total incidence of 16 per cent (with set offs for all taxes paid), and a three-tier import duty structure where the lowest duty would be on raw materials, slightly higher on intermediates and the highest on finished goods.
Chidambaram also met agriculturists today who demanded rationalisation and phasing of subsidies of food and fertiliser in the medium-term. They also urged for an appropriate minimum support price (MSP) well before the sowing season.