PM hints at tariff reduction, tax simplification

New Delhi, Jan 8: Ahead of the Budget, Prime Minister Manmohan Singh today hinted at eliminating tax exemptions, steps towards further liberalisation of the capital account and further reduction in tariff rates and pledged to unveil a new Rehabilitation policy in three months, which will be fair to all the stakeholders.

In his inaugural address at the FICCI AGM, Dr Singh spoke of the need for effective regulatory mechanisms and guarding "against irrational exuberance and ensuring stability of markets''.

He also asked Indian industry not to seek excessive protection as the government was committed to a more open economy and said it should be prepared for a fast track integration of South Asia and the "brave new world of global integration''.

The Prime Minister said the government would put in place a mechanism to remove hurdles in investment proposals. The new rehabilitation policy would seek to enhance the pace of industrialisation by bringing transparency in land acquisition and resettlement of displaced people.

It will be "more progressive, humane and conducive to the long- term welfare for all, he said.

Mr Singh also called for evolving greater political consensus in favour of forward-looking policies. "Our tax regime should be liberal but equitable. It should be transparent and not subject to administrative discretion. I have great faith in the inherent honesty of our people, and we must respect that. When there is transgression it must be visited upon by predictable action. The introduction of VAT in most states of the country has been a matter of satisfaction, We will now move towards a common GST (Goods and Services Tax) and better harmonisation of VAT rates as well, In the long run, our tax regime should not have too many exemptions which make tax administration an unnecessarily complex exercise vulnerable to misuse," he said.

Speaking about having set world class regulatory institutions in the financial sectors, Dr Singh said, "As we gradually integrate India into the global financial system and we gain confidence in our economie abilities, we will gradually move into a less restrictive forex regime. The recommendations of the Tarapore Committee are a step in this direction, mixing caution with optimism," he said.

The Prime Minister said the government has laid down a timetable for tariff reduction and it was crucial to adhere to it. Indian Industry should not seek protection through tariffs and prepare itself for deeper and wider integration with the global economy.

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