Union Home Minister P Chidambaram, the prime author of the new direct tax code, has said the industry is making a mistake by comparing the proposed tax code with the existing income-tax law which has undergone thousands of amendments in recent years and is full of ambiguities.

Chidambaram, who along with Finance Minister Pranab Mukherjee recently released the direct tax code, said it was not surprising that businesses which had been the biggest gainers of all ambiguities and anomalies of the present tax laws were the ones raising objections to various provisions of the direct tax code.

“It is unfortunate that all those who are arguing for tinkering with the tax code are the ones who are benefiting from the present tax system,” Chidambaram, former Finance Minister, told The Financial Express.

“All exemptions and anomalies in the tax laws and provisions have, over the years, rendered our tax system so ineffective that the government is unable to collect the taxes that are due. The corporate sector pays an effective tax rate of 19% and not the real tax rate of 30%-plus. PSUs still pay at a higher effective rate of 28%,” he said.

“So, all those who are asking for amendments to the direct tax code are the businesses who fear their effective tax rate will go up from the present 19% and move closer to 30%,” he added. But that is precisely the idea of a new tax code which removes all anomalies and exemptions and creates a transparent system.

... contd.