Hemant P Chordia: Dear Finance Minister...

What do you want Finance Minister P Chidambaram to do in this Budget? Last week we asked readers to write in with their suggestions, offering a prize for the best letter.

The response has been both overwhelming and interesting. We reproduce here the 10 best entries as judged by our senior editorial team. Business Standard would like to thank all those who participated and regret our inability to print all contributions for lack of space.

A rich incentive
Finance ministry statistics suggest that there are approximately 80,000 people in India whose income is above Rs 10,00,000. This is a small proportion of India's population. Certainly not all these people declare their income correctly. To encourage them to do so, here are some non-monetary suggestions:

offer them special executive magistrate status;

offer priority in issuing passports;

offer priority in train reservations;

treat them with respect in legal problems.

All these things can be done by issuing a photo card. These small things would go a long way towards encouraging people to declare their income correctly and pay their taxes accordingly.

H P Jamadar

Liquor is quicker
I recommend that Value Added Tax be extended to molasses, ethanol and alcoholic beverages. The need for a uniform tax is urgent because marketing alcohol beverages in India is a nightmare. It's like selling in nearly 30 different countries.

True, alcoholic beverages are frowned on, but the segment is also the second-largest revenue grosser for the government. Isn't it time the government gave the liquor industry something to smile about?

Vincent Fernandes

Heavy fuel
Although I understand the finance minister's difficulties in taxing kerosene, I would suggest an environmental tax on petrol, diesel, coal and kerosene consumption.

I would also suggest an environmental tax on all automobiles in general and fuel-guzzling automobiles like sports utility vehicles (SUVs) in particular. Heavy motor vehicles like buses, which promote public transport, could be exempt from this. Once the pool of money is ready, suggestions on how to use it will come in from a number of quarters. Here is mine:

The money can be collected to a fund that can be used (exclusively) for pro-environment activities like promoting public transport, incentivising the use of alternative fuels, afforestation, tree plantation in urban and rural areas, strengthening institutions doing conservation work, water harvesting and so on.

Massive tree plantations in rural areas will not only provide sustainable incomes through agricultural produce and carbon trading but also short-term employment. The government can use this activity as a sweetener to support its Employment Guarantee Scheme.

Ajith Sankar

Senior moments
I invested my entire foreign-earned income in fixed deposits (FDs) with public sector banks in India with high expectations of settling in India during 1984 when the government was promising non-resident Indians (NRIs) everything.

I thought I would enjoy a good standard of living on the interest from this hard-earned money, which was sacrificed for savings when the exchange rate was low, thereby helping the country when foreign exchange was most needed.

However, the government has ignored NRIs like me who settled in India before 1985 and in due course, became senior citizens.

The interest rate on FDs has dropped from 13 to 6 per cent while the cost of living has gone up more than 400 per cent. A four-wheeler costing Rs 65,000 is now more than Rs 2,50,000 and the price of essentials like rice, water, electricity is four times higher now.

We cannot work and our purchasing power has diminished by eight times in 20 years. We need some kind of protection from the finance minister to help maintain our standard of living.

Mankhazhi Ramdas

II

Most Budget exercises look at senior citizens in a welfare mode that envisages protection of their hard-earned savings and earnings in terms of subsidised interest rates; concessional air and railway tickets; separate queues in public health institutions, railway reservation counters and public utilities bill payment counters; priority hearings for court cases; and so on.

Needed as this perspective is, the Budget also needs to take a view of senior citizens as active participants in economic and social development. We are, after all, talking about an age range of 55 to 85-plus and humans with varying capacities and resources on the one hand and the will to lead a productive life on the other.

The resources available to them through their own savings over the years, particularly with an envisaged limit of Rs 15 lakh for subsidised or inflation-protected interest-earning instruments, are quite substantial and also amenable to more productive use by the senior citizens themselves.

Take, for instance, the recent spurt in disinvestment in public sector undertakings (PSUs) or the initial public offerings (IPOs) being floated by companies; there is a good chance that a part of the national wealth being disinvested in the form of PSU shares could become a safe yet productive investment by the senior citizens, provided the Budget takes a minimum protective and preferential stance with a set of conditions. I recall the information provided by a colleague from Singapore at a meeting on social security for senior citizens.

The SingTel company shares were given to citizens in that country with a rider that they would get more if they remained invested for five years. Apart from injecting a sense of national pride in being partners in a national enterprise, the move promised a good deal of capital appreciation over a five-year period with annual promises of substantial dividends.

The finance minister is keen to widen the retail investor base in the equity market. He could consider earmarking a specific portion of such shares for senior citizens with the proviso that they would have to remain invested for three to five years.

Sugan Bhatia

SMEll the issues
I think this Budget should concentrate on providing some liberalised policies towards small and medium enterprises (SMEs). SMEs should be given the benefit of lower taxes, moderate interest rates as well as duties so that they can be protected from negative effects of globalisation and compete globally as well as locally on less unequal grounds.

Rohan Dhagai

Salaried woes
The salaried class is the only class among the taxpayers from which estimated collection can be achieved with ease. Is this class to be penalised for this?

Yet over the past five to seven years not only have tax-saving riders been deleted or reduced but perks have also been added to gross salary. Against this backdrop I would request the finance minister to divide the individual status into two "" salaried and non-salaried class.

The salaried class may be provided either with lower tax brackets or a substantial increase in level of standard deduction. Logically, standard deduction should be made variable and linked to inflation, which can be ascertained at the year-end based on the average inflation level.

Also, deductions, exemptions and rebates should be available to all individuals irrespective of total salary or income as available to corporate and partnership firms.

Devendra Sharma

II

I would like to make the following suggestions for Budget 2005:

• Senior citizens who are retired should not be taxed at all since they are earning pensions to make ends meet. They have already paid taxes during their tenure of service.
  
  
• Salaried people should be spared every year. This year, the finance minister could consider a flat rate of tax as under:
  
  
  
  • Those who are earning Rs 5 lakh and above a year should be taxed at a flat rate of 30 per cent.
    
    
  • Those who are earning Rs 4 lakh and up to Rs 5 lakh should be taxed at a flat rate of 25 per cent.
    
    
  • Those who are earning Rs 3 lakh and up to Rs 4 lakh should be taxed at a flat rate of 20 per cent.
    
    
  • Those whose income is between Rs 3 lakh and up to Rs 2 lakh should be taxed at a flat rate of 15 per cent.
    
  • Those whose income is between Rs 2 lakh and less, should pay no tax.

Krishnan Swaminathan

Small gains
By imposing service tax on hire-purchase companies, the finance minister has possibly overlooked the fact that banks provide the same service through the hypothecation of assets and offer loans that are not subject to a service tax.

To regain a level playing field (though in vain) the only option is for all hire-purchase companies to get into the loan business. But this carries with it other untested formalities since many of the laws only provide banks the protection under debt recovery tribunals and other such institutions.

The simplest solution would be for the finance minister to tax fee-based services and exempt all fund-based services that is, in effect, the very substance of the law.

Instead today, the hire-purchase business is facing extinction, threatening the future of countless players who play a major role in providing micro-credit in areas where no bank has trodden or fears to tread. Indeed, many banks that had operated in even in big cities have exited from this business.