The FM knows this, but has done it nonetheless. Here is a sentence from para 11 of the speech: “Among the other objectives of the Plan (11th) are growth of 4 per cent in the agriculture sector, faster employment creation, reducing disparities across regions and ensuring access to basic physical infrastructure as well as health and education services to all. I have kept these objectives in mind while allocating resources to various sectors.” That’s not what you do if you believe in the tax reform agenda. Incidentally, the impact of concession removal for the IT sector shouldn’t be blown out of proportion. Such units can move to SEZs, this particular exemption removal was on the agenda even otherwise and taxation only applies to the domestic component of services, not to overseas earnings.

Why was this exemption removal agenda ducked? There can be several reasons. First, with growth (manufacturing at 11.3 per cent, services at 11.2 per cent) and tax revenue performing well, why disturb the status quo and slow things down? Second, if one discards discretion, how can one introduce special programmes with catchy acronyms like Digitized E-governance Across The Heartland (DEATH)? MPs and citizens at large expect these. Without them, Part A is knocked out of the budget speech and all suspense and mystery is lost.

Third, every FM loves discretion and sense of power that comes with it. Thus, dog and cat lovers need to be treated differently from pig lovers. If tax rates become standardised and unified, who is going to go to North Block to lobby? While applauding reduction in peak manufactured basic customs duty to 10 per cent, ask yourself why the duty on rough synthetic stones should be 5 per cent, while that on un-worked corals is 10 per cent. There are several such examples on customs and even excise, where all rates (including services) should converge to 16 per cent. Instead, we have discretion, the really perverse instances being the linking of excise to retail prices, for biscuits and cement. Because we won’t push up tax/GDP ratios through removal of concessions and exemptions, we search for taxes counter to the tax reform agenda — dividend distribution tax, fringe benefit tax and banking cash transaction tax are examples. Consider FBT. Fringe benefits aren’t income, they are expenditure. One taxes individual income, not collective expenditure.

... contd.