The new Finance Minister’s Challenge – By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

Finance Minister Jaitley is getting ready to prepare his government’s new budget for 2014-15 which will be presented to the parliament for approval and this is expected to take place in early July. The previous government has made sure that it cannot be a budget which the people would love to see. To help the reader understand we present the following facts which appeared in the daily newspaper.

  1. The UPA government’s interim budget had estimated interest payments on borrowings for its past expenditure will exhaust 43.3 percent (Rs. 427011 crores) of all tax collections in 2014-15
  2. Subsidies were estimated at Rs. 255708 crore or 26 percent of tax collections
  3. Along with pensions, the total commitments add up 80 percent of the net tax revenue for 2014-15 leaving barely 20 percent for governance and development
  4. The estimated central total borrowings requirement for 2014-15 is estimated at Rs. 596083 crore or 4.6 percent of GDP.

Mr. Finance Minister sir, from the outset it is clear that your hands are tied. Extravagances of the past have made your job difficult and its continuance will slowly but steadily push our country towards economic bankruptcy. Sir, the public expectations are that you have on the one hand help a growth rate to move above 6 percent and on the other have to bring down the CPI from the present 8.9 percent. Achieving them simultaneously is next to impossibility.

Sir, your best course of action will be to target inflation and bring it down at any cost. Growth can wait as we are competing with nobody except ourselves. Inflation is the worst enemy as it creates a scare in everybody’s mind about their future.

Sir, kindly think out of the box. You may be aware that Italy recently announced that prostitution and drugs will be considered as legal activities and so will be taxed accordingly. In this regard we have lots of choices.

  1. Legalise betting in sports especially cricket. Betting is taking place any way. Countries like Singapore, Malaysia are all making chunks of money from their casinos. I know Singaporeans bet legally on the outcome of UK football matches
  2. Encourage voluntary declaration of black money with minimal penalty and tax it reasonably
  3. Instead of going after the Swish bank balances of Indians ask the Swiss government to pay taxes on the interest income earned. UK has done that. Why not us?
  4. Add a small percentage of service tax on all the poojas done in temple. Wealthy people spend huge amounts on poojas and they will not mind it
  5. Introduce gambling to raise revenue for the government
  6. Taxing income is a meaningless effort in India as it brings only 11 rupees out of every 100 we spend. Taxing consumption is the most meaningful effort. Let the user pay and encourage consumption.
  7. Finally, bring the experts together from different fields, ask them to be innovative and come up with a new taxation policy.

The guideline should be

a)      All the monies generated in the economy should stay with in the country and not offshore.

b)     All the borrowed money from overseas should become the part of the country’s money like the FDI. Believe me people will understand the challenges you face and will support you all the way. Good luck sir.

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