Ahead of Budget 2017, Arun Jaitley says India needs globally compatible tax rates

The speech gave rise to speculation of tax rate cuts in the Union Budget on 1 Feb, which the finance minister sought to scotch in a later tweet

Ahead of the Union Budget, finance minister Arun Jaitley has pitched for a lower level of taxation that is globally compatible. This, according to him,  is necessary if the country has to have a broader base of economy.He said gone are the days of the philosophy that high taxation will bring greater revenues and that since 1991 the course of economy has altered itself.[caption id="attachment_3137614" align="alignleft" width="380"] Finance Minister Arun Jaitley. Reuters file photo[/caption]"... What you need is a broader base of economy for which you need a lower level of taxation. You need to manufacture products and provide services which are more competitive in character and therefore your taxes have to be globally compatible," Jaitley said while inaugurating the professional training of IRS officers.The comments have raised speculation that the government may cut tax rates in the Union Budget for 2017-18 to be presented in Parliament on 1 February.However, in a later tweet he also indicated that any such interpretation of his speech may be inaccurate.

Ever since the demonetisation of Rs 500 and Rs 1,000 notes, there has been speculation that the government may resort to some direct tax cuts to lessen the pain inflicted on the common man. A cut in income tax rates will placate the middle class, a key political constituency of the ruling BJP.As far as corporate tax are concerned, Jaitley had laid out a road map for cuts in rates and exemptions in last year's budget.In the speech on Monday, Jaitley also said competition is not merely domestic but global and therefore in the last two-and-a-half decades, the governments have been guided by these principles.Tracing the behaviour of people in the last 70 years, the finance minister said there has been an impression if avoidance could be done of government revenue, there is nothing "improper or immoral" about it.

This was, he said, considered to be "commercial smartness" and of course some people were visited with very serious consequences.He told the young revenue service officers that in coming future decades they should see that voluntary tax compliance has to increase in India."And the mindset of the tax payer (should be) that payment of legitimate taxes is a responsibility and then it should be reciprocated by you with a confidence in the tax payer. The tax payer is to be trusted, except when it's proven otherwise.And therefore only in those select cases, very objectively selected, you go in for a wider audit or a wider scrutiny itself," Jaitley said.With PTIFor full coverage of Union Budget 2017 click here.