Budget boost to growth

Budget boost to growth
The Finance Minister has to create an environment where tax
Compliance is easy, avoidance is difficult and evasion is impossible
This year’s annual budget proposed to be presented on 26th Feb, 2010 assumes greater importance than usual as the economy shows signs of recovery and requires further boost to register double digit growth.
The Finance minister faces a formidable challenge as he has to initiate measures to exit the stimulus package liberally introduced in 2007-08 to save the economy from the disaster caused due to international financial crises triggered by sub-mortgage crisis in US financial system and at the same time find new innovative measures to give a stimulus to the economy to perform better in the midst of raising inflationary pressures, ever widening fiscal deficit and expectations and aspirations of people suffering from acute poverty, illiteracy and large scale unemployment. The task is stupendous, but manageable provided he introduces some harsh and simple measures through the budget.
Pending implementation of Direct Tax code proposals, FM can consider simplifying the direct tax administration particularly income tax. The middle class and the rich in the economy have multiplied manifold over a period and it is doubtful whether all are brought under the tax net.
Traders, dealers, brokers, small business people, contractors of different categories and self employed people including professionals earn a lot and may or may not have PAN numbers ,may be filing or may not be filing returns or may be paying or may not be paying income tax or may be paying less tax than what is due.
The FM has to necessarily create an environment where tax compliance is easy, avoidance is difficult and evasion is impossible. The following measures if introduced can create such an environment gradually if not in the immediate future.
Ensure that no individual or family remains without a bank account. Financial inclusion being talked about/ attempted so far has sought to give the poor access to savings and minimum credit facilities, but the real Financial inclusion is to ensure that no one in the economy irrespective of his economic or social status remains without a bank account.
Self employed people including retailers engaged in varieties of activities such as scrap dealers, furniture merchants, contractors vendors ,etc, do not seem to have bank accounts or even if they have one they prefer to deal in cash only. Reluctance to receive cheque or draft in urban/metropolitan centre is very common and many seem to be scared to have the funds credited to bank accounts. The banking habit even among literate and well to do people is not wide- spread.

Dr.T.V.Gopalakrishnan

This appeared in The Hindu-Business Line Dt 26/01/10