The Hindu : National : Economists seek lower tax rates

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Thursday, Jan 13, 2005

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National

Economists seek lower tax rates

By Our Special Correspondent

NEW DELHI, JAN. 12 . Leading economists today suggested to the Finance Minister, P. Chidambaram, to reduce the income tax rates and remove tax exemptions at the same time. It was also felt that the issue of granting tax relief to non-governmental organisations (NGOs) should be re-visited.

In their pre-budget meeting with Mr. Chidambaram, they also suggested that the wages in the employment guarantee scheme should be lower than market rates and that another commission should be set up for a fresh assessment of poverty lines.

For public health spending, the prescription was for a voucher system and it was suggested that financing of social services should be separated from their delivery. It was also suggested that all on-going projects should be evaluated on a scientific basis.

`Comforter'

The economists also suggested that capital account convertibility should be considered by the Government and that a national Value Added Tax, involving partnership between the Centre and the States, should be drawn up and that there should be a single uniform VAT rate. Also, the use of foreign exchange reserves could be considered as a "comforter" mechanism in infrastructure which could trigger positive multiplier effects. A suggestion was also made that the peak rate of customs duty should be reduced to five per cent over the next four years.

In case of agriculture, the suggestion was for drawing up a profitability road map for 8 to 10 major crops; for lowering procurement prices accompanied by appropriate tax, tariff and monetary policies and for setting up of empowered Farmers Commissions. Another suggestion was for setting up a rural university in every agro-climatic region.

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