Kochi: The new income tax proposals rules presented by Finance Minister Nirmala Sitharaman in the Union Budget are so confusing that chartered accountants are going to benefit the most, noted economist Rathin Roy said here on Thursday.
"The economy has been facing severe structural problems of late and the union budget cannot offer any panacea to resolve the crisis," he added while delivering the 21st Malayala Manorama Budget lecture.
However, he said, the government alone cannot be blamed for the current crisis.
Income tax dilemma
Roy was highly sarcastic about the income tax proposals which allow tax payers to choose either the new regime by forgoing certain exemptions or to stick to the previous regime.
Listing the new clauses relating to exemptions, Roy said some of them were unclear.
Terming the rules as chartered accountants' paradise, Roy said they will benefit from the two-regime system because people will have to depend on them for clarity.
“Tax payers will have to spend more on chartered accountants to understand the new rules. In fact, there's no strategic thinking on tax reforms,” he said.
However, later answering a question, Roy lauded the government's long-term intention to do away with all exemptions.
Economy's structural issues
Roy, the Chief Executive Officer of the National Institute of Public Finance and Policy, said the government's failure to collect taxes and disinvest companies to the extent it wanted have left a big hole in the revenue side.
“In a recession year, the government was forced to cut on expenditure. The government did borrow but it could not increase expenditure because the borrowings were not adequate to make up for the fallout of taxes and (income expected from) disinvestment,” he said.
States hit more
Roy, a former member of the Economic Advisory Council to the Prime Minister, said the fall in the tax revenue affected the states more than the Centre.
This is because the Centre got the revenue from certain cess, the share of which were not entitled to the states.
7% growth needed
Warning that any further fall in the growth rate from the current 4.5 per cent would be a disaster, Roy said the economy has to grow at 7 per cent a year on average over 10 years to improve the standard of living of the people.
He was optimistic that the GDP would rise within the next three quarters, though he did not mention any figure.
Roy categorically said that the government alone cannot be blamed for the slowdown. “Demonetisations and GST are not the sole reasons for the slowdown. The macro issues are profoundly different,” he said, urging the government, industries and other stakeholders to come together to overcome the crisis.
He said a change in the demand composition was the need of the hour.
Industries should focus to serve the demands of those in the minimum income scale to boost growth.
Roy, who was also a member of the Central Pay Revision Commission, demanded a white paper on the reasons for the slowdown.
Roy was also associated with the environment protection project of the UN and the World Economic Forum.
An honorary Professor at IIT, Kanpur, Roy has also worked as a faculty in the universities of Manchester and London. He has a doctorate from the University of Cambridge and has numerous research articles and some books to his credit.
