A day before they were to meet Finance Minister P Chidambaram and his team for pre-Budget consultations, industry and business chambers on Tuesday met the chairman of Prime Minister's Economic Advisory Council, C Rangarajan, and opposed the rich tax' mooted by him.
"When there is a need to generate capital resources to invest in developmental needs, any proposal to introduce higher tax rates would be regressive and ultimately prove counterproductive," the Federation of Indian Chambers of Commerce and Industry (Ficci) said in a statement here.
When asked whether higher tax rates meant the tax on the rich that Rangarajan was talking about, a Ficci official said, "Yes." Rangarajan had earlier recommended a higher rate of tax or surcharge for high-income people.
"Such negative policies, particularly when very large untaxed amounts remain visible in the economy, could potentially lead to serious capital flight, encourage tax evasion and serve as a depressant for capital mobilisation and hit business confidence adversely," Ficci added. It opposed inheritance tax, too, terming it regressive and counterproductive. Sidharth Birla, senior vice-president, Ficci, attended the meeting with Rangarajan.
Voicing similar concerns, the Confederation of Indian Industry (CII) said considering the present condition of industry, it would have been natural to expect a stimulus package, involving reduction in excise and service tax rates. "However, looking at the escalated level of fiscal deficit, this could be an unreasonable demand and, therefore, CII suggests the present rates of excise and service tax rates are maintained." CII president Adi Godrej said talks of inheritance tax and other such measures of additional taxation "could negatively impact sentiments".
The chambers also called for resolving issues related to land acquisition, power availability, implementation of national manufacturing policy and the recommendations of the Kelkar committee and demanded the Cabinet Committee on Investment start work.