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Noted industrialist Adi Godrej on Tuesday called for "reasonable and modest" tax rates as an effective way to prevent creation of black money and pitched for a rule-based automatic approval mechanism to fight graft. The government controls in business, he said, breed corruption and this can be tackled by doing away with the practice of seeking permission at every step. In an interview, the chairman of the Godrej Group made a strong case for bringing down direct and corporate taxes to reasonable and modest levels to boost compliance. Backing the government's demonetisation move, he said it should be good from medium to long-term point of view. He said: "Clearly, it will be a lesson for people, it will lead to more probity in future and I think in the middle to long-term, it will be good. I don't think it will fully eliminate black money, but it will clearly add to people avoiding black transactions in future." One of the things that need to be done to prevent accumulation of fresh black money is that direct tax levels in India should be brought down, Godrej added. "Whenever taxes are high, people try to avoid them. If taxes are reasonable and modest, then people don't deal in black money. CII (Confederation of Indian Industry) has recommended that corporate tax level in India should be brought down to 17 per cent," he said. He is of the view that corruption would be dependent entirely on controls the government keeps. "Controls always work negatively and it makes business difficult to conduct. So, if the government removes government controls from a lot of fields, corruption will come down a lot. That will not only help allow corruption come down, help economic growth because controls go against economic growth," Godrej, a former CII president, said. "For everything in India, you need permission from this, permission from that.
They should be made automatic and rules should be laid down. If you break the rules, you should be prosecuted. But this case-by-case permission is something which we should get away from," he said. Godrej supported the idea of state funding of elections. "I am in favour of elections being financed by the government. Then, nobody (political party) can claim they need funds for elections," he said. He appeared to indicate that the abolition of licence permit raj in 1991 and the upcoming GST regime are bigger reforms. "I don't think you can compare. 1991 was a huge reform. This (demonetisation) is also a major issue. But the GST reform will be much more important than this one (demonetisation) to my mind," Godrej said.