Union Finance Minister, Shri Pranab
Mukherjee has said that it is desirable to have a periodic international
dialogue on economic concerns that affects lives in all our countries. He was inaugurating the 4th International Tax Dialogue
Global Conference on “Tax and Inequality”.
Shri Mukherjee said that the present phase of globalization has
brought us closer to each other, than any point in the history of human
civilization. Our opportunities are getting increasingly tied together and so
are solutions to many of our common problems, he said. The Finance Minister said that the
multifaceted integration of societies has created a collective destiny,
unifying many of our development concerns.
Welcoming the
participants, Shri Mukherjee said that India is delighted to co-host this conference and
expressed happiness over the international tax dialogue joining hands with the
Ministry of Finance in organizing the conference. He said that the Conference has brought
together an impressive panel of stakeholders to deliberate on tax matters by
involving national tax officials, international and regional tax organizations,
policy makers and experts from around the world.
Shri Mukherjee said that this
conference addresses on important theme namely, “Tax and Inequality” which is a
central concern for effective governance and just functioning of a modern
welfare nation-state. He stated that the intricate relationship between growth
and inequality poses challenges for the formulation of tax policy in both
developed, as well as developing countries.
Shri Mukherjee said that on the one hand, progressive tax policy is a
means to address growing inequalities in incomes and wealth and on the other
hand, it provides resources to address the structural issues in inequality and
poverty. He said that it facilitates the implementation of public programmes
and expenditure policies for capacity building of the less fortunate
individuals and communities within countries. At the same time, tax policy has
implications for incentivizing economic activity, savings, production or
consumption, and hence growth. It is thus a vital instrument of public policy
and has to be carefully used, the Minister said.
The Finance Minister said that the policy
makers need to make difficult choices about how tax systems can best support
growth and help in creating fair and equitable societies. He said that principles
of horizontal and vertical equity are important if a tax system is to be seen
as fair. Shri Mukherjee said that tax administration, which includes mechanisms
to register taxpayers, collect revenue, enforce compliance and provide redress
when required, also has a direct bearing on fairness of tax policy. The Minister said that a good tax policy if
not administered properly may result in a distribution of the tax burden very
different from that which would occur if the tax code was administered
effectively.
Shri Pranab Mukherjee said that there
is much that we can learn from each other’s tax systems, working experience and
the best practices and there is also a need to collaborate and align and make
our tax systems speak to each other as we get integrated and the cross-border
economic transactions multiply. He stated that the deliberations in the
conference would contribute to that process. Informed policy making leads to
better tax policy and tax administration and better tax policy and effective tax
administration leads to better lives for our citizens, he said.
The Finance Minister said that the issue
of the tax reforms was at the heart of the process of economic reforms and
liberalization that India
embarked on in the early 1990s and we had come a long way since then. He said that the tax reforms though gradual
have been systemic in scope, particularly when we consider the proposals
currently awaiting implementation. The reforms have covered both the direct
taxes as well as the indirect taxes. Shri Mukherjee said that the proposed
Direct Taxes Code brings together the policy initiatives on the direct taxes
and is slated to come into force from the next financial year. Similarly, he
stated that we are moving towards an economy-wide generalized value added tax
system of goods and service taxes at all levels in the country. The Finance Minister said that the tax reforms
have been directed at:
·
Simplification
of tax system and its administration;
·
Rationalization
of tax rates;
·
Broadening
of tax base;
·
Special
focus on sunrise area of taxation like transfer pricing and international
taxation;
·
Strengthening
tax information exchange network with countries/ jurisdiction;
·
Improvement
of tax administration;
·
Better
tax payer services and reduction in cost of compliance;
·
Robust
dispute resolution mechanism; and
·
Focused
enforcement on high net worth individual tax abuse practices and high revenue
risk.
Shri Mukherjee said that an efficient
tax system is a fundamental requirement for sustained development of any
nation. Taxes underwrite the capacity of a nation to implement its development
and welfare goals, he said. The Finance Minister said that it is a means to
promote equity in the distribution of gains from economic growth in a country
like India.
He stated that we have adopted a progressive personal income tax to address the
inequality and our progressive direct tax policy has resulted in a ten-fold
increase in direct tax revenue from USD 8.62 billion in the fiscal year 1996-97
to US 87 billion in fiscal year 2010-11. The Finance Minister said that more
importantly, the composition of our tax revenues has altered significantly in
favour of direct taxes which now account for nearly 60 per cent of our total
tax revenues. We have tried to address
the issue of gender inequality and old age vulnerabilities by providing some
tax relief to women and old people, he said.
Shri Mukherjee said that tax evasion
undermines the intended benefits of a progressive tax policy. He said that the problem
is compounded by illicit outflow of money from emerging economies and
developing countries. Global financial integrity has estimated such annual
illicit outflows averaging between USD 725 to 810 billion from these countries.
The Finance Minister said that the Indian
Government has adopted a five pronged strategy to deal with issues of tax
evasion and black money which includes:
·
Joining
the global crusade against black money;
·
Creating
an appropriate legislation framework;
·
Setting
up institution for dealing with illicit money;
·
Developing
systems for implementations; and
·
Imparting
skill to the manpower for effective action.
In his concluding remarks, Shri Mukherjee said that the strategy has
started showing result. However, resolution of these issues requires international
co- operation and alignment of tax systems for better cross-border compliance,
he added. The Finance Minister said that
the complexity of cross border transactions is on a rise and presents a serious
challenge to tax administrators in practicing and bringing equality. The opacity
of tax systems in some of the jurisdiction is adding
to the challenges. There has been some movement on these issues in response to
the initiative by G-20 but we need to pursue this to its logical end, he said.
Speaking
on the occasion, China’s Vice Minister of Finance, Mr. Wang Jun said that at
the crucial moment of world economic and social development, it is of great
importance and significance for people from the world financial and tax
communities to gather together, share their experience and wisdom to make their
contributions to a more balanced global economy, more equitable international
community and more harmonious human society.
Deputy
Managing Director, IMF, Mr. Min Zhu said that the IMF had been focused on the
issues of inequality and poverty for many years, across the range of their
activities. He said that in its
surveillance and program work, IMF has long highlighted, to give just one
example, that the benefits of the huge fuel subsidies in many countries go
overwhelmingly to the richest, and that there are better ways to help the poor.
Also
present on the occasion were Minister of State for Finance (Revenue), Shri S.S.
Palanimanickam and Minister of State for Finance (Expenditure, Banking and Insurance),
Shri Namo Narain Meena.
SS/GN