First, it encourages lobbying. Witness queues in North Block before the budget and industry chambers falling over backwards to invite finance ministers to their gatherings. Second, a relative preference in favour of any category is always at the expense of some other category. Why should housing exemptions be superior to those in favour of human resource development? True, discretions grant sense of power to finance ministers. But that shouldn't be the point. A discretionary case can always be made out in favour of every sector. Imperial Rome taxed urine (tanneries using urine actually), Tsarist Russia taxed beards and Pitt's Britain taxed windows. In each case, there was a valid reason. The case for non-discretionary tax reform has been argued out by several committees, the three Vijay Kelkar Task Forces being the most cogent.

However, few finance ministers since 1991 have walked along that indicated path. The two obvious ones are Manmohan Singh during 1991-96 Congress government (for import duties) and Yashwant Sinha under NDA (for excise). The predilection has generally been for what can be called N.D.Tiwari-type sindoor budgets.

UPA-I didn't take India towards that tax reform agenda. Instead, there were deviations and the system was cluttered up. By all indications, 2009-10 will continue along the deviant path. FM isn't going to announce standardised direct and indirect tax rates (including GST) with clear time-lines for attaining them. (At best, import duties can be left dangling, since they depend on negotiations.) Therefore, not only will Part A remain because of policy announcements, it will also remain to justify arbitrary and discretionary tax proposals.

... contd.