What is the difference between corporate tax exemptions and subsidies for the poor?: PM Modi

Just a month before the government presents the budget for the coming financial year, Prime Minister Narendra Modi questioned the need for corporate tax incentives, reports the Hindustan Times.

Speaking at an event in Delhi, Modi asked: "Why is it that subsidies going to the well-off are portrayed in a positive manner? Let me give you an example. The total revenue loss from incentives to corporate tax payers was over 62,000 crore. Dividends and long-term capital gains on shares traded in stock exchanges are totally exempt from income tax even though it is not the poor who earn them. Since it is exempt, it is not even counted in the 62,000 crore."

Modi added, "Double taxation avoidance treaties have in some cases resulted in double non-taxation. This also is not counted in the 62,000 crore. Yet, these are rarely referred to by those seeking reduction of subsidies. Perhaps, these are seen as incentives for investment. If the fertiliser subsidy were to be re-named 'incentive for agricultural production ', I wonder if some experts might view it differently."

The Prime Minister went on: "I must confess I am surprised by the way words are used by experts on this matter. When a benefit is given to farmers or to the poor, experts and government officers normally call it a subsidy. However, I find that if a benefit is given to industry or commerce, it is usually an 'incentive' or a 'subvention'."

Ideology could have no effect on such matters, the PM said. "We have to be pragmatic. We have to eliminate bad subsidies, whether or not they are called subsidies. But some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence, my aim is not to eliminate subsidies but to rationalise and target them," he said. "True reforms are those which result in transformation in the lives of citizens."

Last year in his budget speech Finance Minister Arun Jaitley had said that while the government would bring down corporate tax from 30 per cent to 25 per cent over the next four years, it would also phase out corporate tax exemptions and deductions.