Budget 2013-14 should not be as usual budget, there are lots of responsibilities resting on the shoulders of Finance Ministry on driving the growth forward. I think, more or less this time budget will focus more on populist views as it will be prepared keeping 2014 Lok Sabha elections in mind. As usual it will focus on more incentives and subsidy schemes for underprivileged and below poverty people (Aam Admi). In this process government borrowings are expected to grow up and definitely fiscal deficit figures will not be good to watch. The draft highlights of Economic Survey, clearly indicates that there is not much big thing achieved in industrial sectors and the Whole Sale Price index is not curtailed properly. The service sector share no doubt has increased but, not up to the extent of demand. This is a serious area to think as we are getting huge investment in these sectors and it is not simultaneously matched by outcome in such sectors. Service sectors like Banks and Insurance business is not contributing much towards in this line. There is also recent announcement of extra licenses in banking sector, so unless we have proper regulated financial sectors the future is very tough when it comes to money market operations.
Series of steps are required to be taken in terms of plugging controls in revenue loss in case of tax collection. System of Tax administration should be made more accountable and competitive. Instead of going for revision in tax rates and increasing the burden of tax, better administration and ending corruption in tax department need to be thought of in this budget. Since, majority of tax filings are done on e-filing, still there are lot of loopholes in the administrative part and the Finance Ministry should first target to make administration more and more accountable and responsible. Lot of tax pending issues are there in different courts and tribunal and huge money is blocked in such cases and the ministry through this year budget proposal take it as a priority issue and try to set up special cells in different courts and should take steps for speedy disposal of cases.
Much awaited GST and DTC bills which are yet to be given the final nod needs to passed after taking in to confrontation from all the state governments. Recent measures and amendments in Service Tax even though it indicates slow movement towards GST regime yet lot of confusion still prevails when it comes to revenue sharing and transfer of benefits between states. Biggest challenge in terms of monitoring and maintenance of electronic data in GST regime needs to be strictly thought of and unless a clear cut system is setup finance minister should desist from announcing adoption of GST from 2013-14 onwards. As a International Taxation and Transfer Pricing consultant, I feel that not much is done in case of Transfer pricing in India. Compared to global changes taking place in the areas of Transfer Pricing, lot needs to be adopted by Indian government. A confrontation needs to be established between tax payers and government in order to arrive at structured Transfer Pricing rules and regulations. It is found that in recent years many of the cases relating to Transfer Pricing issues are pending in many courts, this is because of no proper relationship and coordination between taxpayers and Transfer Pricing Officials. Many a time the cases has resulted in embarrassing situations and the tax payers are ending up with paying huge taxes for issues which they are not aware of . So, this budget should focus on these issues and should try to bring amendments in Income Tax act in order to strengthen the Transfer Pricing Mechanism both in administration and collection areas. As government has come up with measures to increase the participation of FDIs and FIIs in development sector, it is important that the Income Tax act relating to International Taxation sections get amended by replacing the old rules with the new guidelines which takes in to consideration DTAAs and GAAR provisions. There are lot of confusion and some of the areas have not proper clarity in respect of International Taxation and this is resulting in outflow of tax revenue to other countries and such areas need to be thought of in the Budget and suitable measures should be incudled.
Coming back to the most important issues of development, I still do not understand What development and Whose development we are talking about for last 65 years. My surprise is that having so called one of the leading Economist as our country’s Prime Minister and Cambridge University alumnus as Finance Minister, what we have achieved in terms of social development?. Some of the statistics published has placed India much behind some of the African countries and some small islands of the globe. For eg. Latest Global Health Index (GHI) ranks India at 65 the place out of total 79 countries (Uganda,Ghana,Pakistan and Srilanka) are ranked much above us. India performs poorly when it comes to question of underweight in children, under-five mortality rates, average years of schooling etc. even though we project in our budget every year huge sum of money for addressing these issues still we are not able to deliver good to our own suffering people. For. Eg. Budget 2012-13 includes a sum of Rs 15,850 cr for child development and where has this money gone. All tax payers pay 3% education cess and where has this money disappeared, as one of the survey indicates that average year of schooling in India is only 4.4 years (in Tonga it is 10 years, Fiji 10.7 years) . One more interesting statistics which really disturbs us is on the front of Maternal Mortality Rate, India ranks low with 230 deaths of mothers per 1,00,000 live birth (in Srilanka 39 deaths, Solomon Islands 100 deaths, China 38 death). Where are the schemes gone, is there a social audit in place for implementation of these schemes? If moneys used properly for the schemes, then why we still rank 135th country out of 185 country in Human Development Index (HDI)? Who is answerable for this? These are the areas where Finance Minister should focus in his budget speech as there is no meaning for development unless we improve standard of living of masses, education and health.
We always fail at implementation stage, we draw up with lot of things but when it comes to delivery stage we fail miserably. This is what we have done for last 65 days and enough is enough at least now onwards let us move forward. It being 150 years of Swami Vikvekananda Jayanthi let us work towards the directions and path called for my Swami Vivekananada and make Bharath (India) has a role model country in the world. “Enough of we looking towards the World, let World start looking at us”.
CMA Raveendranath Kaushik
Consultant – International Taxation and Transfer Pricing