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ASSOCHAM Expresses Concerns Over Indian Super Tax

by Mary Swire, Tax-News.com, Hong Kong

25 February 2013


Indian business leaders have expressed concerns over the possible implementation of a "super rich tax," with a majority warning that the measure would be ill-advised.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) surveyed 85 Chief Executive Officers (CEOs) and senior executives across various sectors and cities ahead of Finance Minister's P. Chidambaram's upcoming Budget. A majority of those questioned feared that any such levy would turn out to be a "tax and spend" initiative, and that business sentiment could take a hit. It could also act as a disincentive to wealth and value creation, with 61% expressing this concern. Many argued that the focus of both Government policy makers and of public debate should shift away from the "super tax" to "super growth." It was felt that this strategy alone can provide the solution to both the fiscal deficit and India's economic inequalities.

The ASSOCHAM survey report notes that: "Profit-making and wealth creation are essential attributes of a business enterprise, we need not stifle these attributes, just because the economy is facing bad times. There are several other ways to return to the fiscal prudence – cutting the wasteful expenditure, leakages in untargeted subsidies." ASSOCHAM wants to see the Government concentrate on improving tax administration, and stresses that tax avoidance is a problem that must be tackled.

The poor quality of public services is also cited as impacting on the willingness to comply. One respondent to the ASSOCHAM questionnaire stated, "If I pay super rich tax, at least I should get a minimum standard of public service. So far as the responsibility of the super rich is concerned, wealth creation would necessarily involve employment generation and contribution to the government exchequer in any case."

However, the survey did not show a blanket rejection of a possible super tax. 39% of respondents said that they could live with such a levy. Yet acceptance remained tentative, and based on the caveat that the tax should be modeled as a surcharge, and in place for no more than two years. Further, ASSOCHAM itself is not keen on the prospect. Its President, Rajkumar Dhoot, believes the tax "will not yield much." He feels that the "best way to remove social and economic inequalities" is to keep up rates of economic growth. According to Dhoot, Indian industry "expects the Finance Minister to give us a growth-oriented budget which promotes investment and revival of the economic sentiment."

TAGS: compliance | Finance | tax | business | tax compliance | India | tax avoidance | tax incentives | fiscal policy | gross domestic product (GDP) | budget | tax planning | tax rates | tax reform | individual income tax | services

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