The Telegraph
Since 1st March, 1999
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PC finger on rollback

New Delhi, March 2: Finance minister P. Chidambaram today hinted at a rollback of the tax on cash withdrawals above Rs 10,000 in a single day from a bank.

He reiterated his promise to also take a second look at the fringe benefit tax, saying: 'There is no need to go ballistic on this.'

Chidambaram indicated to business barons at his first interaction since the budget that he was under pressure from the Congress as well as allies to backtrack on the 10,000 tax.

'I told the Congress MPs yesterday that I was open to addressing the issue another way,' he said.

The issue he was seeking to address with his anti-tax evasion measure was the 'huge cash withdrawals from the banking system for which there was no apparent purpose'.

'I am not a stubborn man: I am only stubborn about achieving my objectives' I am ready to put on my thinking cap and address the problem differently,' he added.

'We must find a way to deal with the problem.'

If an alternative is not available, Chidambaram could raise the threshold from Rs 10,000 to, say, Rs 50,000. In last year's budget, banks were asked to furnish an annual information report on all transactions above Rs 50,000.

Chidambaram also said he was ready to correct the anomalies in the fringe benefit tax, which has shaken industry. The measure requires employers to bear a tax on the value of perquisites they give their employees collectively.

He conceded that industry might have a case against the fringe benefit tax on sales promotion and publicity expenditure. 'We can ask the draftsman to take a look at the language carefully,' he said.

Chidambaram advised industry to wait till the finance bill takes final shape after discussions in Parliament. 'There is time enough to make corrections,' he added.

Officials say the plan is to soften the blow by withdrawing the fringe benefit tax from superannuation benefits. The levy had been slapped on contributions made by employers to group superannuation funds on behalf of employees. This had led to a lot of heartburn among corporate executives.

The finance minister said the budget had introduced the most courageous direct tax reforms since 1997 ' harking back to his Dream Budget.

He claimed that everyone stood to gain in a situation where a person could spend 60 per cent of the salary and save 40 per cent. 'If we can encourage people to spend 60 per cent and save 40 per cent, we will have a booming economy.'

Companies have been most upset over the cut in the depreciation rate on capital assets and machinery they buy since it means paying more taxes to the government.

'We have worked out the numbers; the depreciation accruals will be the same over a period of five years whether you follow the old or the new system,' he said, arguing that industry had no reason to moan.

Peak customs rates had been cut to Asean levels but, he admitted, there still was some way to go on excise restructuring.

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