Chidambaram looks at increasing taxes on the rich
The government should consider charging the very rich more tax, Finance Minister P Chidambaram told a news channel on Thursday, but emphasized that he believed in "stable tax rates."
NDTV | Last Updated: January 24, 2013 12:48 (IST)
The government should consider taxing the very rich more, Finance Minister P Chidambaram has said, but emphasizes that he believes in "stable tax rates."
"We should consider the argument whether the very rich should be asked to pay a little more on some occasions," Mr Chidambaram said in an interview to a TV channel today.
His comments come in the lead up to his 2013-14 Budget, due to be presented to Parliament on February 28.
Prime Minister Manmohan Singh's economic advisor C. Rangarajan suggested last month that government could consider either raising the tax rates or imposing a surcharge on income tax paid by the super rich. (Read: C Rangarajan for higher taxes for super rich)
The government is under pressure to raise more taxes to contain the widening fiscal deficit and to fund welfare programmes following a fall in tax collections due to slowing economic growth - seen slipping to a decade-low level this fiscal year ending in March.
Mr Chidambaram did not say who should be included in this category and nor did he say whether he would support such a move. Currently, the top tax rate of 30 per cent applies to taxable income above Rs 10 lakh.
The Finance Minister had, earlier this week, told investors in Hong Kong that taxes will not be raised and that the tax regime will be stable. (Read: Chidambaram seeks to reassure foreign investors)
The theme of economic disparity also found resonance at the World Economic Forum in Davos. On Tuesday, Azim Premji, chairman of IT major Wipro, told NDTV Profit that India's super-rich cannot treat extreme wealth as personal wealth. (Read: Rich should pay higher taxes in poor India, says Azim Premji)
"In such a poor country, there is legitimacy in taxing the super-rich," he said.
However, other captains of India Inc., including HSBC's country head for India and director of Asia Pacific Naina Lal Kidwai and Godrej Industries chairman Adi Godrej, have said the government should not raise taxes on the extremely wealthy as it would discourage entrepreneurship. (Read: India Inc against higher taxes for super-rich)
"It is important to avoid new taxes to preserve sentiment. The government should not levy commodities transaction tax," Mr Godrej said.
Ms Kidwai, who is also the president of industry body FICCI, has proposed that corporate taxes be kept unchanged. The threshold for paying income tax at 30 per cent should be raised from Rs. 10 lakh to Rs. 20 lakh, she added.
"A higher rate of tax on the high income group is uncalled for... it will discourage entrepreneurship," she said.
(With inputs from Reuters)
Story first published on: January 24, 2013 12:01 (IST)