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Tax rate should be stable: Finance Minister

Singapore, Thu, 24 Jan 2013 NI Wire

Union Finance minister P Chidambaram Thursday advocates on to have a stable tax rate structure but also argued that very rich should pay more at some time.

"I believe in stable tax rates. However, I must concede when the economy requires, when the government requires more resources the very rich should willingly pay a little more," said Finance Minister P Chidambaram while talking to a TV news channel on Thursday.

The income tax rates are still unchanged since 1997, when he (erstwhile Finance Minister) fixed the income tax rate at 10%, 20% and 30% depending upon the annual individual's income. However the slab (margins of the tax rate) became changed every year.

Four Finance Minister and four government survived since 1997, but the tax rate still remained so far, said FM.

Chidambaram ruled out the speculation of election-influenced-budget for fiscal year 2013-14, by stating "The election is a good 14 months away from the budget. The Budget will be a responsible budget."

The finance minister said if on February 28 he could show that the government has kept fiscal deficit below 5.3% and if budget estimates show that the next year's fiscal deficit will be below 4.8%, then he can show a healthy growth in revenues over next year.

"I think that is the time when rating agencies should consider moving us from...I mean improving the outlook and then improving the rating," he said.

--With IANS Inputs--

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Dr. Rekha Jagannath

January 24, 2013 at 7:22 PM

It is true (proved through research) that stable tax rates encourage tax compliance. But Laffer curve has also proved that higher tax rates lead to negative productivity of at least income tax.When he says the rich should be willing to pay a 'little more tax'how much is 'a little more tax' has to be contemplated by the FM.This little more should be as less as not to affect the Keynesian MEC (marginal efficiency of Capital)=Prospective yield from capital+MPI (marginal propensity to invest)(change in investment/change in income). High taxes are a factor that affect MEC. Now MEC is already on the low due to US and UK economic scenario (but it is said to be marginally picking up).



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