New Delhi, January 18, 2018

Budget ought to bring in such a move, say experts at open house

Budget 2018-19 should look at mechanisms to make rich farmers fork out meaningful sums to the exchequer, suggested several tax experts from global professional services firm Deloitte, Haskins & Sells LLP.

This is especially so when the government is faced with revenue pressures and looking to rein in the runaway fiscal deficit. The Budget is expected to be bent more towards the ‘Economics of Entitlement’ than the ‘Economics of Entrepreneurship’, said the experts from the firm at an open house pre-Budget discussion with BusinessLine here on Wednesday.

“The expectation is that there is something immediate and concrete that could be done for the farm sector. We expect the roadmap for fiscal consolidation to be recalibrated and some expenditure related schemes to be announced for the agriculture sector,” said Richa Gupta, Senior Director with the firm.
Package for exports

“We also expect for some sort of a roadmap reinforced for the economic package that was announced in November for the Bharatmala project — on how it will be financed. More details may also be spelled out on how the NPAs will be financed. Keeping in line with the Make in India scheme, the other sector where the focus will be on is exports, and there might be a package for them,” Gupta said.

Direct benefit transfer (DBT) schemes can be the tools to identify the higher income farmers, the experts said.

Rohinton Sidhwa, Partner in the firm, said: “We need to find a solution where we can charge a turnover tax of some sorts on rich farm households. According to tax returns data, Rajasthan has more income tax assessees than Punjab. So the poorer States are showing a higher level of compliance, as opposed to the richer States. And this diversion is attributed in large part due to agriculture incomes being tax exempt.”

Sidhwa also expects that the Budget will bring back long-term capital gains (LTCG) tax on trades put through stock exchanges. He felt that the government may go in for an arrangement where the securities transaction tax will co-exist with the levy of long-term capital gains on securities.

Corporate income tax

He further believed that Finance Minister Arun Jaitley will keep his promise of reducing corporate income tax. Bringing corporate tax reduction to a specified class of companies alone — like it was done last year — has brought its own challenges.

“This has created an inequity in the business and existing companies have started looking for ways like starting a new company and then merging the old one with it to save tax. So if they make an announcement to reduce, they must give it across the board to avoid creating inequality in the ecosystem,” he said.

A lower corporate tax rate may excite the industry but the return of LTCG tax will surely spook investors. Sidwa said: “The current mood in the Finance Ministry is that they want to tax it. So they were very much against taking it down earlier. At that point of time there was pressure form FIIs and others that made it go to zero, but they would like to bring it back.”

Long-term capital gains

“The effect of having zero LTCG tax has been very good for the stock market. Today our stock market is at its peak. But in order to straighten things out, the government should tax everything moderately. Not as high as 20 per cent but perhaps at 10 per cent,” he added.

The Budget is also expected to enforce some in-direct tax reform, despite the GST Council taking over the rate setting powers of the Finance Minister. Deloitte Senior Director Saloni Roy said: “The Central GST law can be amended to bring petroleum products within the purview of the Central GST.”

[The Hindu Business Line]