LTCG tax unpopular but beneficial: Jaitley

NEW DELHI: Finance minister Arun Jaitley on Thursday defended the imposition of longterm capital gains (LTCG) tax on equities in the Union Budget, but acknowledged that it was an unpopular decision.

But unlike the previous Congress-led United Progressive Alliance government, the BJPled National Democratic Alliance government was not afraid to “bite the bullet” on tough decisions, Jaitley insisted.

“Whether it’s demonetisation, Insolvency and Bankruptcy Code or GST, these are difficult decisions... I can’t recollect between 2004 and 2014, a single structural reform of this kind being taken, the kind that we have undertaken,” Jaitley said during a discussion on Budget 2018-19 in the Lok Sabha.

Jaitley did not just take the political battle to the opposition, he also reaffirmed the government’s commitment to pursue politically tough reforms. By focusing on the rationale behind the LTCG tax, he also implicitly defended an attempt at income redistribution — cast as a rich versus poor debate, the message could reap the BJP an electoral advantage in next assembly polls and the national polls in 2019.

“Structural reforms may be of momentary difficulty, but in the medium and long run, they bring huge dividends to the economy,” Jaitley argued. Elaborating on the contentious 10% LTCG tax on equity investments proposed in the Finance Bill, he said it was to correct an anomaly whereby the incentives were unfairly skewed towards high net-worth entities and individuals. Jaitley claimed the 2018-19 budget presented on February 1 had provided relief to the middle class.

Structural reforms may be of momentary difficulty, but in the medium and long run, they bring huge dividends to the economy itself. ARUN JAITLEY, finance minister