I.N.D.I.A. bloc committed to predictable and stable tax environment: Jairam Ramesh
Summary
Ramesh told CNBC TV18 that in his opinion, the Modi regime has fostered an unprecedented atmosphere of fear and distrust, exacerbated by an unpredictable tax regime and frequent changes to the GST and income tax policies.
Congress Rajya Sabha MP Jairam Ramesh raised concerns about the current economic climate in India, highlighting the lowest levels of private investment as a proportion of GDP seen in the last decade.
Ramesh said the Modi regime has fostered an unprecedented atmosphere of fear and distrust, exacerbated by an unpredictable tax regime and frequent changes to the GST and income tax policies.
In an exclusive conversation with CNBC-TV18, he emphasised that the I.N.D.I.A. bloc is committed to establishing a stable and predictable tax environment. The key priorities for this alliance include implementing GST 2.0 and eliminating exploitative tax measures like the angel tax, with the overarching goal of restoring confidence and trust in the economic system.
Here is the excerpt of the interview
Q: You felt the need to clarify on these reports on market volatility because businesses, investors, markets have their doubts as to what will happen post the 4th of June. Why did you put out that clarification?
A: I was not responding to the volatility, I was responding to the incitement by the home minister and the prime minister on speculating the causes of the volatility and attributing it to the inevitability of the I.N.D.I Alliance getting its majority. I was responding to the fact that the home minister was deliberately trying to key up markets. However, what I was putting forward was the reality. The reality is that private investment is at an all-time low as a proportion of GDP in the last 10 years, the atmosphere of fear and distrust has never prevailed like this as it has prevailed in the last 10 years.
The uncertainty in the tax regime, the frequent changes in the GST regime, the income tax regime, these are all sort of trends that we have seen during the Modi regime, whether it’s demonetisation, or whether it’s the uncertainty and unpredictability of economic policy. So, I was responding to that, and what I was saying is that the I.N.D.I.A group, or the political parties in the I.N.D.I. Alliance, are committed to a predictable tax environment in which removal of this fear and distrust is of primary importance. GST 2.0 is of importance. The removal and elimination of angel tax and other exploitative tax initiatives is of importance. So that’s what I was reacting to.
Q: Why should businesses believe this pitch? Because when you speak about taxation, it was the retrospective taxation during the UPA era that investors still talk about. In companies like Cairn Energy, Vodafone, they had faced the brunt of it, it became a legal hassle globally as well.
A: The Cairn issue was carried forward. Arun Jaitley, who called Vodafone tax terrorism indulged in that tax terrorism when it came to Cairn Energy. So, please, let’s have the full history of this.
Q: Former Union minister Veerappa Moily also said this was something that has hurt the Congress Party and the UPA. So how would you assure investors and businesses that those kinds of decisions will not be taken?
A: The best assurance is the performance. I remember on the 13th of May 2004, the results came out and on the 17th of May 2004, which was a Monday, markets fell very significantly. Manmohan Singh’s name was announced as prime minister, the next day, and markets resumed, coming back to their normal position after a few weeks. And then for the next 10 years, you had an average growth rate of GDP of 6.8%, you had a private investment rate, which was going at about 30-33% of GDP. So that’s the reality. The reality was the performance.
If you take the GDP growth rate and look at the private investment as a proportion of GDP, the 10 years of 2004 to 2014, was vastly superior to this much-hyped period of 2014 and 2024. I am just talking about, this sector of the economy, I’m not even getting into issues of wages, unemployment and other issues. I’m just talking of the headline numbers, the GDP growth number is significantly higher ā 6.8% during Manmohan Singh decade versus 5.8% during the Modi decade.
Also, a record number of private entrepreneurs were taking citizenship of Singapore, Dubai, London, and the US. Why are they fleeing? They’re making the profits here and they are fleeing.
Q: What about things like corporate tax? This government had reduced corporate tax on existing companies and startups? What’s your view on that?
A: The very significant drop in corporate tax rates took place incidentally a few days before the Howdy Modi event in Houston. There was an international audience that the outgoing prime minister was playing to. The corporate tax rate was reduced, but private investment has not boomed. There’s no buoyancy in private investment, it is still stagnating at about 27-28% of GDP. And why are businessmen now going and seeking citizenship of Dubai and Singapore and other countries of the world?
Q: Will you review the decision of corporate tax and think about hiking it?
A: No, no question of that. We have to have a predictable tax regime. Investment is not just a financial decision, investment is a psychological decision. And today the psychology in India is one of fear, is one of distrust, is one of suspicion. The extraordinary draconian powers that have been given to organisations like the ED, the CBI and the Income Tax Department ā small traders, small businessmen, medium-sized traders, medium-sized businessmen, even big business, people are afraid to speak, and if they’re afraid to speak they are afraid to invest.
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