Sunday, February 15, 2009 - Incharge of Finance Portfolio, Mr. Pranab Mukherjee is likely to unveil host of measures for farmers and common man to help them come out of present contraction in economy, offer equitable tax cuts to India Inc. and revisit corporate tax rates, which remain unaltered for many years while presenting his Budget proposals on February 16.
In India Inc.'s Pre-Budget Expectations Survey conducted under aegis of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) with participation from its 400 members in manufacturing, services, agriculture and allied sectors, over 70% exuded optimism saying that Mr. Mukerjee is likely to announce packaged deal for manufacturing, agriculture, textiles, steel, cement, real estate and ITeS to significantly release their ongoing stress due to global slowdown.
"The Finance Minister is also expected to announce increase in personal tax ceiling and introduce measures to hike subsidies, put in place series of low-cost housing schemes and revamp public distribution system with special focus on rural employment and education", felt over 60% CEOs.
Releasing findings of ASSOCHAM Survey, its President, Mr. Sajjan Jindal said that the major demand of India Inc. for many years has been for reduction in corporate tax which remains unattended to. India Inc., therefore, anticipates that Mr. Mukherjee would revisit corporate tax rates in India and not only remove surcharge on it but bring it down at global average of around 26-27% especially at times of meltdown.
According to ASSOCHAM, corporate tax in European countries is around 23%, in Latin America it is 26% and that of Asia Pacific around 28%. China brought down its corporate tax from 33% in 2007 to 25% in 2008, Germany from 38% to 29% and in Hong Kong, corporate tax its nearly 17%, in Malaysia and Philippines it is between 26-27% against over 33% of India.
80% of CEOs that took part in ASSOCHAM survey felt the need for across the board reduction in excise with minimum 4% cut in it and urges the government to introduce Goods and Services Tax (GST) by 2010 as promised by the UPA government. In addition, this percentage of CEO has also demanded imposition of heavy anti-dumping duties on goods coming to India from many of its neighbour including those of China, Sri Lanka, Malaysia, Thailand and Philippines.
Nearly 55% of CEOs have said that although inflation has fallen significantly and its impact is being reflected on prices of many commodities such as metal, zinc, copper, aluminum which is a good development since crude prices internationally have come down heavily. This lot of CEO is optimistic that the inflation will further moderate to help common man access commodities in near future at much cheaper rates.
However, the major challenge before the Finance Minister would be to explore ways so that prices further moderate which can happen provided supply demand mismatch is removed with fairer transportation and other transaction costs.
A vast majority of CEOs have felt that manufacturing and agriculture are extremely stressed sector. The situation in cement and steel is still alarming. Despite demand, their consumption is not rising because of cost factor and therefore anomalies in duty structure needs to be urgently revisited, said Mr. Jindal, quoting findings of ASSOCHAM Survey.
On international trade front and reduction on fiscal deficit, 70% CEOs held that India's foreign trade will remain under severe pressures as export targets will be extremely difficult to be realized and nearly 30% fall in export target is anticipated for current fiscal. Likewise, the fiscal deficit which the UPA government had contain below 3% is likely to be close to 5% and even higher for current fiscal.
The Chamber has, therefore, recommended that while government will keep on earning revenues through direct and indirect taxations, the policy makers will have to work harder to create demand for its goods and services in markets that are not saturated and reduce its fiscal burden by putting in place a benign tax regime, concluded the ASSOCHAM Survey.
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Union Budget