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Tuesday, Jul 20, 2004

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National

Clash over transaction tax in Rajya Sabha

By Our Special Correspondent

NEW DELHI, JULY 19 . The discussion on the Union Budget in the Rajya Sabha today saw the Finance Minister, P. Chidambaram, crossing swords with the former Finance Minister, Yashwant Sinha.

The National Advisory Council member, Jairam Ramesh, delivered his maiden speech, the former Telecom Minister, Arun Shourie, said he was opposed to foreign direct investment (FDI) in telecom and Nilotpal Basu of the CPI(M) said the Government's desire to solve the crisis of livelihood was not reflected in the financial allocations.

Mr. Chidambaram rose to challenge Mr. Sinha's observations on the controversial transaction tax on securities. He did not agree that the Government had landed itself in a spot by replacing the capital gains tax with the new cess. "I have abolished the capital gains tax with a neat tax that prevents avoidance. I will revise the number in some categories. Do you support the principle of transaction tax or not?" he asked.

Mr. Sinha said he supported the principles behind Jaswant Singh's interim Budget. Mr. Chidambaram said instead of opposing the concept, Mr. Sinha should offer an alternative set of numbers. Mr. Sinha in turn pointed out that Mr. Chidambaram had violated a concept propounded during his previous tenure as Finance Minister in 1996-98. Quoting from the 1998 Budget speech, he said the Finance Minister had then said financial intermediaries should not be taxed. However, six years later, he had proposed just that. Mr. Sinha also referred to "several instances of tokenism" — food stamps would be issued but the pilot project covers just a couple of districts. Flood control, said to be a priority, got an allocation of just Rs. 30 crores. He said Mr. Chidambaram had overestimated the tax collection figures and inflation was a matter of worry. "The Finance Minister has indulged in fudging of figures," he said. Mr. Ramesh explained the backdrop to the Budget countering criticism of some of its aspects.

Mr. Basu said there were several grey areas in the estimate for revenue income. "Is it possible to reach those figures?" he asked. Mr. Shourie referred to the warning from security agencies to argue against the Government's move to hike the FDI limit in the telecom sector. He said the previous Government had not hiked the FDI limit after the Intelligence Bureau had pointed out several security concerns.

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