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Economists suggest lower income tax rates to boost economic activities

28 Dec 2016 Evaluate

In a bid to boost economic activities top economists at a meeting headed by Prime Minister Narendra Modi at Niti Aayog, have suggested a simplification and reduction in corporate and personal income tax rates, harmonisation of customs duties to global levels and more steps to create a bigger formal economy by building on demonetisation. 

During the meeting, economists also recommended simplification of taxes and better coordination between the data bases of the tax department's two arms— CBDT and CBEC. On indirect taxes, the suggestion was to unify customs duties across the manufacturing sector to about 7 per cent to prevent inverted duty structures. Besides, experts have suggested that there is a need to invest in the tourism sector which has potential to generate high paying job and making Indian universities world class.

Niti Aayog Vice Chairman Arvind Panagariya said “Tax simplification figured quite a lot on the direct taxation, both corporate and personal income tax on simplifying, reducing exemptions, bringing down tax rate and aligning tax system to make India competitive with international destination.” He also added that one of the issues that came up for discussion was tariff inversion whereby tariff on component and inputs are higher than the final products so that undercuts the incentive to produce the final product. Therefore, he suggested to harmonise the tariff to single rate to 7 per cent or so.

The high-level meeting, which comes ahead of the Budget, did not go into the demonitisation impact on the economy, while the aspect of digitisation to make it a less cash economy figured. Apart from Panagariya, the meeting was attended by finance minister Arun Jaitley, senior government officers and senior officials from Niti Aayog. The economists and experts who were present include Pravin Krishna, Sukhpal Singh, Vijay Paul Sharma, Neelkanth Mishra, Surjit Bhalla, Govinda Rao, Madhav Chavan, N K Singh, Vivek Dehejia, Pramath Sinha, Sumit Bose and T N Ninan. The government is planning to present the budget for 2017-18 on February 1 instead of the regular date of February 28.

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