Finance Minister Arun Jaitley has promised a rational tax rate for individuals and bringing down of corporate tax to 25 per cent flat in four years beginning next fiscal along with removal of exemptions except those that encourage individual savings.
Addressing students and faculty at the Columbia University here last night, he said along with a rational rate of taxation, more banking transactions and making PAN card compulsory for payments over a threshold limit will go a long way in tackling the problem of domestic black money.
He also said that once the corporate taxes go down, the exemptions, over there is a bulk of litigations and discretions, will have to be phased out.
The Finance Minister said the world needs "additional shoulders" other than China to push growth and this presents an opportunity for India.
He outlined the roadmap of the BJP-led Government for the coming months, saying the Goods and Services Tax (GST) will be a "top priority" and hoped to take the Bankruptcy Code to parliament in the winter session.
Referring to the problem of black money, the Finance Minister said, "The first step is you rationalise your rates and have rational rate of taxation which helps you in making sure that people comply.
"The second factor is that the nature of the economy is itself changing so more and more banking transactions, payment getaways are a reality, all this is going to incentivize and a lot of economy is going to go through the banking transaction as a result of this."
In addition to this, Jaitley said the government has already announced in the budget that it is seriously looking at some category of transactions making PAN card compulsory over a particular threshold limit.
"As far as corporate taxes are concerned, once corporate tax rates go down the exemptions will have to be phased out," he said.
"These are those corporate exemptions which people get... Bulk of the litigation and discretion is around those exemptions," he added.
He is also looking to put most of the exemptions, except those which encourage individual savings, to an end. Starting with 2016-17 year, the corporate tax rate will be brought down to a 25 per cent flat corporate tax.
"Over the next four years this entire rate would come down to 25 per cent. And I will be removing each one of those exemptions one by one. I am shortly going to notify all the exemptions which are going to be rationalised this very year itself," he said.
Jaitley said that one of the main problems is of credibility related to taxation issues.
"As far as the taxation issues are concerned, a lot needed to be done at our end and therefore in terms of direct taxes, we'd lost credibility with the world," he said.
Aggressive taxation did the country no good and does not bring taxes but it "brought us a bad name", he said.
"For anyone in the government, it would be a very serious challenge where assessment orders have been passed can only be set aside by a judicial process and not by an executive decision," he said, adding that to resolve each one of these issues has been one of his toughest challenges.
He, however, expressed satisfaction that one by one each of those issues related to direct taxes is now being put to rest. Jaitley said the government is "keeping all options open" to resolve the taxation issues either by judicial or executive process.
"I think the fears of retroactive taxation... by and large have been put to rest," he said.
On growth, he said the revolution of raising expectations in India is a good sign. He reiterated that India has now reached a situation where it is no longer satisfied with a 6 to 8 per cent growth rate and most Indians believe that "my normal is eight plus (growth rate), probably closer to nine per cent" and higher.
"I see nothing wrong in the pressures being built on the decision makers that the faster you move the better it is for the government," he said, adding that being placed in such a situation is an opportunity for India.
"One of the great shoulders the world was relying on (was) China. The world now needs some other additional shoulders to give a push to the growth rates.
"It is a great opportunity and if we continue to move in the direction in which we are, I see over the next few years with a more friendly environment in the world as far as the economic scenario is concerned, probably our growth rates will move up, our ability to grow will move up and our ability to fight poverty at least will also improve," he said.
Noting that India grew by about 7.3 per cent last year, Jaitley said that according to internal estimates, this year "we could do a shade better than that."
He reiterated that India has now reached a situation where it is no longer satisfied with a 6 to 8 per cent growth rate and most Indians believe that "my normal is eight plus (growth rate), probably closer to nine per cent" and higher.
"I see nothing wrong in the pressures being built on the decision makers that the faster you move the better it is for the government," he said, adding that being placed in such a situation is an opportunity for India.
