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Domestic entities warned against misuse of double taxation pact — Cess no bitter pill: Chidambaram

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On the imposition of cess on central taxes to fund education, Mr Chidambaram said that he did not see it as a ``bitter pill'' and maintained that the doctrine of proportionality would be applied.


The Finance Minister, Mr P. Chidambaram, addressing a press conference at his office in the Capital on Friday. - Ramesh Sharma

New Delhi , May 28

THE Finance Minister, Mr P. Chidambaram, on Friday put domestic entities on the watch-list for scrutiny of possible misuse of Double Taxation Avoidance Agreements (DTAA).

``DTAA treaties are well-established instruments. If a case of misuse arises, then it must be stopped. There is no reason to apprehend that the DTAAs would go. The misuse is not by a foreign investor, but by some Indians,'' Mr Chidambaram said at a press conference called to explain the economic agenda of the United Progressive Alliance's (UPA) Common Minimum Programme (CMP).

Hard-selling the CMP, the Finance Minister said that he would be visiting Mumbai to remove apprehension from the minds of FIIs and Indian industry.

``Early next week, I will visit Mumbai to meet SEBI, FIIs and representatives of industry. I will carry the commitments (on capital market) made under CMP to them and answer any lingering doubts,'' he said.

On the imposition of cess on central taxes to fund education, Mr Chidambaram said that he did not see it as a ``bitter pill'' and maintained that the doctrine of proportionality would be applied. ``The doctrine of proportionality will be applied. The burden of cess will fall on those who can bear the burden,'' the Finance Minister said.

On the proposal to review the Electricity Act, 2003, Mr Chidambaram said that unbundling of State Electricity Boards (SEBs) would be put on hold till the review takes place. He said that more private players would be allowed into power generation and distribution.

``Pending the review, we are postponing the unbundling of SEBs. In course of time, unbundling would take place. While we review the Act and keep unbundling in abeyance, new private players would come in power distribution. I don't think unbundling is a precondition for more private players to come into power generation and distribution,'' Mr Chidambaram said.

The Finance Minister did not give any indication on whether the mention of devising of ``special schemes to unearth black money'' mentioned in the CMP implies that there would be a new tax amnesty scheme like the Voluntary Disclosure of Income Scheme (VDIS). ``The word amnesty is your interpolation. The CMP merely talks about special schemes,'' Mr Chidambaram said.

He said that the UPA Government would try to ensure an interest rate structure that would take care of ``both savers and investors.'' He also said that attempts would be made to keep inflation at low levels. ``That (low inflation) is the premise of every development strategy. Every effort would be made to keep inflation under control,'' he said.

Mr Chidambaram said that a good monsoon might result in the indicative growth rate of 7-8 per cent being exceeded. ``If we are lucky with the monsoon, we will get more than 8 per cent,'' he said.

On foreign direct investment (FDI), he said that the country could easily absorb 2-3 times the present level of FDI, which would mean annual inflows of $10-15 billion.

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