After giving a bonanza to income-tax payers by changing the slabs, Finance Minister P Chidambaram on Saturday said the next step should be removal of surcharges if the revenue buoyancy continued.

“Last time anyone has set the tax rates was 1997. This time we have set the tax slabs. I am reasonably confident that these tax slabs are going to stay for a long, long time; we have brought moderate taxes and reasonable tax slabs,” Chidambaram told TV channels.

Individuals with income of more than Rs 10 lakh and corporates pay surcharge at the rate of 10 per cent and there was a strong demand from corporate houses to do away with surcharges.

“If revenue buoyancy continues, I am sure the next finance minister, which I am sure would be from the Congress party, will begin to remove the surcharges. I think surcharges should go... may be in two steps or four steps,” he said.

Chidamabaram had changed the personal income-tax rates to 10, 20 and 30 per cent in 1997-98 Budget, which was touted as “dream budget”. Again it was Chidambaram who restructured the tax slabs in his Budget on Friday.

Fiscal consolidation
Asked whether general elections were on his mind while making this Budget, he said: “every year there are elections in the country; 2006 was an election year, 2007 was an election year and 2008 is an election year. I have presented my fifth Budget... According to schedules, elections are in May, 2009. Budgets don’t decide election agenda. Its how you communicate to the people what Budget contains that can help win elections... and what is wrong in that.”

Chidambaram said: “I think we have done fiscal consolidation. We have demonstrated that moderated and stable tax rates can bring better tax compliance.” Speaking about his tenure, Chidambaram said: “I am happy that the batting average has been 8.8 per cent in the last four years.”

He, however, admitted that the government should have taken reforms process faster. “There are large areas of economy where reforms should have taken place and controls were removed...if we can remove them, economy would grow even faster,” he said.

Defending his decision to keep corporate rates unchanged, he said corporates are doing well, they are making good profits, they are paying good taxes and effective tax rates on them works out to be 22-23 per cent.
“There is no reason to tinker with rates this year. You do not fix something which is not broken,” he said.