Need clear tax laws to prevent black money creation: Niti Aayog chief
Arvind Panagariya terms taxation laws in the country as ‘ill-defined'
MUMBAI: Terming taxation laws in the country as “ill-defined”, Niti Aayog vicechairman Arvind Panagariya on Sunday called for removing ambiguities in them so as to do away with “discretion of the tax officer”.
He also said that demonetisation of high value currency is just one step to combat black money, and more needs to be done. “Tax reform is really important to curb black money,” he said at a panel discussion here.
“More simplification means reduction and presumably elimination of the many exemptions under the existing laws. Also, we need to spell out many of these rules and laws explicitly. In our case the tax laws are often ill-defined. That of course leads to scope for discretions,” he added.
He said tax reforms like reduction in stamp duty are necessary to stop generation of black money in the system and that this should be done at the earliest following the demonetisation of high value banknotes.
“Demonetisation is one of the steps to stop creation of black money but a lot more needs to be done,” said the academic-turned planner.
Underlining the need for removing ambiguities in tax laws, he said: “We have to go back, start looking at those tax laws, if there is a way to make them precise enough so that it is not left to the discretion of the tax officer but the law itself is clear enough that the taxpayer can figure out rather than having to negotiate with the tax officer.”
Calling for the need to bring in reforms related to stamp duties to stop black money, Panagariya said: “Stamp duties vary widely across the states and there is need to look at that. If you keep the stamp duties too high, that encourages under the table real estate transactions.”
Panagariya said demonetisation was not done completely out of the blue but it was part of the Prime Minister's promise to combat corruption.
This was preceded by at least half-a-dozen steps against corruption such as appointing SIT (after the Supreme Court asked it to do) to probe black money stashed away aboard, an income disclosure scheme that ended on September 30 and amendments to the Benami Property Act, he said.
On the impact of notes ban on growth, he admitted that there have been some dislocation in the short term but he was quick to add that some dataprints suggest that industrial activity is rising.
Despite many economists suggesting that the government's claim of a bounty has not fructified, with close to Rs 11 trillion (Rs 11 lakh crore) of the Rs 14 trillion of banned money already reaching bank accounts, he claimed that demonetisation will translate into a lot of extra revenue for the government.
He also called for creating an ecosystem in which the labour-intensive industry can flourish and hoped that the proposed coastal employment zones may play an important role in creating such an environment.