The Hindu Business Line : VAT will raise tax base, reduce prices: Moily

THE former Karnataka Chief Minister, Mr M. Veerappa Moily, has said that the implementation of the value-added tax (VAT) will increase the tax base and bring down the prices of commodities.

Inaugurating a seminar on VAT organised by the Kanara Chamber of Commerce and Industry (KCCI) in Mangalore on Saturday, he said currently nearly 60 per cent on a commodity is being paid as tax to the Government. VAT will bring down this tax rate, making the commodity competitive in the market.

Allaying fears among traders about the impact of VAT on their business, Mr Moily said there will not be any cascading effect under VAT. Cascading effect, which is seen under the current taxation system, makes the commodity uncompetitive in the market, he said.

"Overcautious bureaucrats mislead politicians while implementing reform measures and create confusions," he said, adding, "Bureaucrats should be educated more on VAT."

Mr Moily, former Chairman of the tax and revenue reforms commissions of Karnataka, said a good tax system is the basis for a country's progress.

The revenue of the Karnataka Government increased by nearly Rs 2,500 crore after implementing some of the recommendations of reform committee reports, he added.

Mr L. Sridhar, chartered accountant from Bangalore, who was the resource person at the seminar, said VAT has the flexibility to generate large and buoyant revenues. It will bring down the tendency to evade taxes, he said.

The KCCI President, Mr A. Srinivasa Rao, who presided over the function, said many traders in Mangalore plan to migrate to Kerala because of the stringent tax system in the State. He hoped the introduction of VAT may help prevent such migration.

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