Industry leaders, on Wednesday, asked the government not to consider imposing higher tax on high income individuals, saying it would discourage entrepreneurship, while seeking early implementation of the Goods and Services Tax (GST) and continuance of the existing corporate tax rate.
At a pre-Budget meeting with Finance Minister P. Chidambaram, representatives of industry chambers, including the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Associated Chambers of Commerce and Industry of India (Assocham), also cautioned the government against imposition of inheritance tax, saying such a step would penalise savings and investments and discourage capital formation.
“A higher rate of tax on high income group taxpayers is uncalled for as this would discourage entrepreneurship. It could lead to professionals relocating to low tax domiciles such as Singapore, Dubai or London,” FICCI President Naina Lal Kidwai said. For personal income taxes, FICCI recommended that the maximum rate of 30 per cent be made applicable for an income above Rs.20 lakh (as against the existing threshold of Rs.10 lakh).
Expressing similar views, Assocham President Rajkumar Dhoot said: “Nowhere in the world this happens. Our opinion is tax them (the rich) but tax them reasonably. They have money and with that money they invest in the country, which generates jobs. The investments from the rich men also give excise duties, sales tax and, hence, generate revenues also.”
Commenting on the issue, CII President Adi Godrej said: “We have said that any increase in taxes (on rich) will create a negative perception on investment and therefore should be avoided.”
“We used to have 90 per cent rate of taxes and used to have 3 per cent of growth. Lower rates of taxes have been known to give higher collection. Absolute collection should increase,” Mr. Godrej said, adding that taxing the rich more and inheritance tax were phenomenon of developed economies. On the issue of GST, Ms. Kidwai said the Centre should reach out to State governments and come out with a clear plan of implementation and timing at the earliest.
Mahindra & Mahindra Chairman Anand Mahindra said, “Mr. Chidambaram’s specific request to industry was to provide ideas by which investments could be revived both foreign and domestic.