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India's new govt promises low and stable tax regime for economic revival

Published on Jul 25, 2014 8:25 PM
A file picture of Indian Hyderabad Metro Rail (HMR) labourers work at a construction site in Hyderabad. India's new right-wing government under Prime Minister Narendra Modi has promised a new era of greater opportunities and stable and simple tax regime as it looks to win back investor confidence and spur economic activity. --PHOTO: AFP

NEW DELHI (REUTERS) - India's new government pledged on Friday to pursue a low, stable and simple tax regime as it looks to win back investor confidence and spur economic activity, both of which have nosedived due to mounting tax disputes.

A struggle to raise revenues in a sluggish economy and the pressure to narrow the fiscal deficit to avoid a "junk"sovereign credit rating had forced the previous administration to aggressively collect taxes from companies.

Although the drive produced only insignificant increases in tax receipts, it swelled the total amount of taxes tied up in disputes and litigation to 4 trillion rupees (S$82.6 billion) and dented corporate sentiment.

Finance Minister Arun Jaitley said the government would shun that approach and instead focus on smoother and investor-friendly tax policy to boost industrial activity and generate higher revenues. "We are interested in creating a situation where...we revive that sentiment back," he told parliament. "My approach has been that we try and resolve disputes. We try and end arbitrariness. We try and give as much relief to the vulnerable as possible."

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