The Hindu Business Line : A rut of recommendations

DURING December and January, chambers of commerce gear up for what has now become an annual ritual — the pre-Budget memorandum. This basically contains a wish-list of the industry, primarily focusing on direct and indirect tax issues. In the past few years, this document, apart from being physically delivered, is also conveyed through the electronic media. Press releases are also issued highlighting the critical areas that need to be addressed in the Budget. But, more often than not, most of the issues remain un-addressed. A cynic once remarked: "Take a photocopy of the last year's memorandum and just change the date."

The fact is the entire process of preparing the memorandum has become routine and serves only as statistical information. Surely, time has come to have a re-look at the entire exercise.

The process

Budget-making is serious business. Unfortunately, various chambers of commerce use this opportunity only to seek concessions and incentives. It is a pity that they have not yet involved themselves wholeheartedly in the Budget-making process. A couple of research institutions, it is learnt, have attempted such an exercise.

The pre-Budget memorandum is usually addressed to the Finance Minister and copies are marked to various designated officials. But there is no proof whether the recommendations are looked at in detail. Precious time and energy are wasted on the exercise, but the amendments, if any, are invariably not the ones suggested in the memorandum.

Nani Palkhivala had once remarked: "Time has come to present the Budget once in two years — if not for anything else, to save time and energy of the people involved." Why should I-T amendments be ushered through annual Budgets? After all, the annual Finance Acts convey the tax rates to individuals and the corporate sector. The Budget should stop with this. If at all amendments have to be brought in, mainly to cater to some urgent needs of a particular sector or to get over some Supreme Court decision, they can be collected and presented through a separate Amendment Act.

The prescription

Major amendments to legislation need not be shrouded in secrecy. Any amendment should be thrown open for debate before the D-Day. One can understand Central Excise and Customs duty rates being amended in a hurry to prevent misuse of the provisions, but not direct taxes amendments brought out on Budget day.

As a beginning, Budget 2006 should maintain status quo on direct taxes and announce the income-tax rates. It is learnt that a full-fledged exercise to rewrite the I-T Act is on. A separate Amendment Act may be introduced in the new draft legislation, without mixing up issues involved in the annual Budget. This will help avoid unnecessary paperwork, and the annual exercise will be confined to expenditure statements. Also, chambers can get together and call for a meeting of the regional representatives to Parliament. Presentations should be made on issues relating to the annual Budget and the need to debate financial matters in greater detail must be highlighted. This alone will ensure the success of the pre-Budget memorandum.

(The author is a Chennai-based chartered accountant.)

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