Financial Daily from THE HINDU group of publications
Thursday, Jan 12, 2006
Corporate - Taxation
Industry & Economy - Disinvestment
Chidambaram promises to simplify fringe benefit tax `Non-navratna disinvestment on track'
New Delhi , Jan. 11
THE forthcoming Budget will provide relief to the corporate sector on compliance with the fringe benefit tax (FBT) provisions. The Finance Minister, Mr P. Chidambaram, on Wednesday said that `some simplification' could be expected in the area of FBT in the Budget.
"Taxing perquisites is a universal practice and it has both vertical and horizontal equity. Having said that if there are any glitches in the manner in which tax is defined and administered, I have always said that we can revisit that matter. Industry has asked for simplification of FBT and some simplification can be expected in the Budget," Mr Chidambaram told newspersons at a meeting of the Forum of Financial Writers here today.
Ever since the FBT was introduced in the last year's Budget, corporate India has been lobbying for scrapping the tax. Alternatively, they have been demanding that the complexity of the FBT system should be reduced.
The Finance Minister said that disinvestment in non-navratna public sector undertakings is on track.
"We will take on board the formal positions of certain parties. But we have held discussions with them and we will monetise small portions of government's equity and the proceeds will be put in the national investment fund," Mr Chidambaram said.
Food and oil subsidy: On the Government's move to put on hold the recent decision of the Cabinet to cut the food subsidy Bill (by about Rs 2,400 crore), Mr Chidambaram said that the decision is on hold pending further discussion with the Congress Party and other parties in the Government and the Left parties.
"Mr Sharad Pawar (Union Agriculture Minister) will engage in the discussion. Further discussions between Mr Pawar representing the Government and the political parties will bring clarity to the matter and at the end of the discussion, there is going to be a decision," Mr Chidambaram said.
To a question on whether the Government is open to increasing subsidy in the Budget for the petroleum sector, which is now being borne largely by the oil companies, he pointed out that oil companies are largely Government owned.
"The subsidy today is borne partly on the Budget and partly on the balance sheet of oil companies. I don't think it makes a big difference by shifting the subsidy burden from the balance sheet of oil companies to the Budget. What you are suggesting will make the balance sheet of oil companies better, but will make the Budget look bad," Mr Chidambaram said.
He added that oil sector revenues would remain the significant part of total tax revenues of the Union Government.
The Government would take a view on further reform of tax structure in the oil sector after the Rangarajan Committee submits its report.
Fiscal deficit: The Finance Minister said that the UPA Government was on course to achieve the fiscal deficit and revenue deficit targets set out in the Budget of 2005-06.
CST abolition roadmap: Asked whether the UPA Government has a roadmap for central sales tax (CST) phase-out, Mr Chidambaram said "not yet."
He said that one round of discussions has already been held with the States on this area.
Lahiri panel's report on FIIs: On the status of the Dr Ashok Lahiri Committee report on foreign institutional investor inflows, Mr Chidambaram said that the report would be considered by the High-Level Committee on Capital Markets.
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