To expand I-T base, tax rural sector ‘including farm’: Debroy

NITI’S 3-YEAR ACTION PLAN

AS A part of its three-year action plan, the Niti Aayog is expected to suggest tackling tax evasion, and expanding the tax base as the key reformsforimprovinggovernance in the country. The think-tank’s memberbibekdebroyontuesday said that other than removal of corporateandpersonalincometax exemptions, taxing the rural sector “including the agricultural income above a certain threshold”, could be a way to expand the tax baseinwaysthathavehithertoremained untouched.

“The answer to increasing the tax base on the corporate side is the elimination of exemptions, which has already been announced. In fact, the reduction in the corporate tax rate is linked to theelimination,”debroysaid.“on the personal income tax side also, exemptions should go, which leaves the rurals ... but the eventualanswertoexpandingthebase on the personal income tax side, other than elimination of exemptions, is to tax the rural sector including the agricultural income aboveacertainthreshold,”hesaid.

When asked about what the threshold could be, Debroy said: “I don’t believe in artificial distinctions of rural-urban. So whatever is the threshold on the personal income tax on the urban side shouldbeexactlythesameasthat on the rural side. At best what I can do is, because it is agricultural income, instead of using income for one particular area, I average it out over maybe a three-year period or a five-year period. Because, agricultural income, as professor Ramesh Chand will endorse, is subject to annual fluctuations. Barring that, the threshold should be the same.”

Further, to simplify the tax system, the draft could recommend consolidating the existing custom duty rates to unified rates, said Niti Aayog vice-chairman Arvind Panagariya.

The three-year action plan, which would have seven overarching themes — revenue and expenditure framework; economic transformation in major sectors; regional development; growth enablers; governance; social sectors;andsustainability—alsoproposesreductionofthefiscaldeficit to 3 per cent of the GDP by 201819, and the revenue deficit to 0.9 per cent of the GDP by 2019-20. This is broadly in line with the latest recommendations of the Frbmcommittee,whichpegsfiscal deficit at 3 per cent of GDP by 2017-18, and to be maintained at thatleveltill2019-20.forrevenue deficit, the FRBM committee pegged it to be at 1.55 per cent of GDP by 2019-20.

The action agenda also proposes to formulate a tentative medium-term expenditure framework (MTEF) for the Centre. Based on the forecasts of the government’s revenue, it would propose sector-wise expenditure allocation for three years. “The roadmap will consist of shifting additional revenues towards high-priority sectors such as health, education, agriculture, rural development, defence, railways, roads and other categories of capital expenditure,” Panagariya said.

To address the high NPAS, Niti’s action plan is likely to propose supporting auction of larger assets to private asset reconstruction companies, and strengthening of State Bank of India-led ARC. The 2016-17 Economic Survey had suggested creation of state-owned ARC, but Panagariya made a case against the idea of bad bank, saying it will be a difficult proposition and a private asset reconstruction company could do a better job.

Niti vice-chairman Panagariya said draft could recommend consolidating the existing custom duty rates to a unified rates to simplify the tax system further