Lower tax rates possible only if evasion brought down, says FM Jaitley

MUMBAI: Finance minister Arun Jaitley said on Saturday that moderate taxes and high evasion could not coexist, as speculation continued over the rate of the proposed goods and services tax (GST).

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“If all taxpayers pay their taxes, it will help bring in tax rates further low. The more the evasions and exemptions, the higher will be the tax rate. So, moderate tax rates and evasions cannot coexist,” Jaitley said while addressing BJP workers in Mumbai.

He was replying to a demand by Mumbai BJP president Ashish Shelar to lower the proposed GST rate to 17%.

The minister, in his 35-minute address, also tracked the country’s economic trajectory since Independence and faulted Nehruvian economics for tripping India’s chances of making the most of growth opportunities in the last five decades. He critiqued former prime minister PV Narasimha Rao’s role in ushering in the economic reforms of 1991, pointing out that the late Congress leader was not a liberal thinker or a reformer and had been forced to initiate reforms by the country’s impending bankruptcy.

“I was reading the book on Rao (Half Lion: How PV Narasimha Rao Transformed India) and came across something very strange. When Rao became the education minister in Andhra Pradesh, his first decision was that all private colleges should be abolished and only government should run all colleges,’’ Jaitley said.

“I believe that post-Independence the path we took was not the one that could have led us to progress or development. In the first three-four decades post-Independence, our growth did not go beyond 2% to 2.5%; in the global scenario this was referred to in jest and some sarcasm as the Hindu rate of growth,” he said.

“Post-World War 2 when Asian countries like Japan, Korea and Taiwan used technology and innovation to push their countries on the global map, we were impacted by Nehruvian thought and believed that some things only the government should do.”

Taking on the UPA regime from 2004 to 2014, Jaitley said in that decade the country’s development trajectory seemed to have got lost again after Rao’s and Atal Bihari Vajpayee’s governments.

“The belief then (during the UPA regime) was that you don’t have to increase productivity but concentrate only on redistribution. This was reflected in our experience with the National Advisory Council,” he said.