Anil Harish is one of the leading legal experts on matters relating to taxation, property transactions, and the Foreign Exchange Regulation Act.
He is a partner of D. M. Harish & Co, one of India's leading legal firms. Anil has addressed conferences on a wide-range of subjects such as the budget, foreign exchange laws, property laws, and taxation in Bombay, Delhi, Dubai, Madras, Muscat, Pune, and Singapore.
In an interview with equitymaster.com Mr. Anil Harish spoke at length on the various aspects of the budget.
EQTM: Let us start off by your Initial reaction to the budget. How would you rate the budget on a scale of 1 to 10 and why? How would you compare it to the last yearís budget?
Mr. Anil:I would gauge the budget more in terms of the speech of the Finance Minister, as the budget is not clear till the whole document is read. My initial reaction to the speech is that it is extremely disappointing. The budget does not do much in terms of providing a detailed framework on reforms for the economy nor does the budget in any way address the basic needs of the Indian economy. Simplicity in tax procedures is one of the primary needs of the country. Apart from that a greater emphasis has to be given to the reduction of bureaucracy and redtapism. Also, I donít find any steps taken in order to reduce the government expenditure. On the disinvestments front all the activity has been concentrated in the latter half of the year. The money raised through disinvestments is approximately 50 bn compared to a budgeted 120 bn. I would gauge the budget not only in terms of the speech that the finance minister made but also on the fact that this is the fifth budget he has made and also in terms of the commitment of the government to walk the talk. I feel a lot of the budget promises in the past have not been kept hence we must look at the broader picture as to how the government is going to implement these promises. I would not rate this budget high, as I donít see any vision in this nor a cause for enthusiasm. The budget does not suggest any short term or any long-term benefits; it just tinkers with certain key issues like disinvestments, infrastructure spending, rationalisation and simplification of duties and taxes with out giving a definite action plan. I would rate this budget lower than last yearís budget.
EQTM: What is your view on increasing the net of service tax? Would there be any problems in administration? How does the government tackle the compliance issue?
Mr. Anil:Though this tax is simple in terms of compliance and computation there are still some problems in administration. This provision with the intention of increasing the tax net will only increase the burden on the assesses. The main issue with taxation in India is the multipoint system of tax, where there are so many heads under which the assesses can be taxed. In my view, this head of tax should not have been implemented till there was a full-fledged reform of the tax system.
EQTM: Last year the finance minister broached the subject of exit policy and labour reforms. The latest budget does not seem to have moved forward on these issues. How do you view this development?
Mr. Anil:I think that the finance minister needs to pursue these policies, which have been announced in the past. The idea of an Action Taken Report (ATR) is novel but only relevant if action is taken on the budget promises. The major constraint in implementation is the will of the government, which seems to be lacking.
EQTM: The most crucial part, government has been talking of a hard budget but perception was that it was hinted towards the industry. This budget, the taxpayer, it seems, has been made to swallow a bitter pill. What are your views? Could there be a better way of mobilizing revenues?
Mr. Anil:The provisions in this context made by the finance minister do not make much sense. The revision of the exemptions on provident fund investments is not justified. In my view this measure may be to phase out the PPF, as the collections are going to come down in a large way. PPF as an investment option will loose its charm and collections are likely to drop, as the returns may not be attractive to the investors.
EQTM: What are your views on the steps taken on indirect taxes?
Mr. Anil:The minister in the previous budget had proposed a system of VAT but in the current budget there has been no mention of it, this shows the lack of implementation on part of the Government. The idea is not to make two-hour speeches with umpteen points. I would be happy if he promised little and delivered on those fronts.
EQTM: What is the one aspect of the budget you like and dislike?
Mr. Anil: The one aspect of the budget I dislike is that this budget is very ordinary. This comes across as a very pedestrian budget with no focus on next generation reforms. Another aspect of the budget, which I strongly dislike, has been the measure of taxing the individual for dividends. The removal of distribution tax at the hands of the corporate and taxing it at the hands of the individual just does not make sense. This will only lead to lack of compliance and increase administration time of the authorities.