Govt must ease tax regime, incentivise Make in India
February, 03rd 2016
Considered as one of the poster boys of Make in India, the South Korean electronics giant LG invests Rs 1,000 crore annually in its Indian arm and at any given time has more than 2500 people working in its two factories in the country.
The company is now grappling with lower sales in rural India thanks to the poor monsoon and falling disposable income in urban centres.
In CNBC-TV18's Budget hangout, LG India's top boss talks about how the finance minister can boost consumer spending.
Speaking to CNBC-TV18, Kim Ki-Wan, MD, LG India, says the industry environment needs simpler tax regime and the government should cut tax rates and weed out unnecessary litigation. By lowering excise duty and abolishing 20 percent dividend tax, the companies can benefit as high Indian taxes are hurting consumer sentiments, he adds.
In addition, Wan is of the view that Finance Minister should announce low cost consumer financing facilities and the government should incentivise Make in India.
Below is the transcript of Kim Ki Wan’s interview with CNBC-TV18's Nayantara Rai.
Q: What is it that you think needs to be done in Budget 2016?
A: All those tax policies should be simplified and transparent.
Q: So, when you say they need to be simplified do you mean that the rate should be cut or do you mean that they should be done away with?
A: Not only reducing the tax rate but also implementing those tax, the processes should be clear to improve and to remove any litigation or dispute. So, we have experienced some unnecessary dispute or some litigations.
Q: So, are these big litigations, do they involve large amount?
A: Not that big but to globally stand out, should be improved.
Q: You say taxes should be cut. Which taxes should be cut?
A: Many taxes. For the consumer to improve their purchasing power consumer income taxes should be lowered and the excise duty range should be lowered. Dividend tax even 20 percent, it should be removed because already we pay a lot of taxes.
Q: Are we far more expensive? Is India far more expensive tax wise compared to other countries? What is the experience like?
A: Yes, some area, more expensive. For instance, other countries, there is VAT, here there is no VAT. Now, GST is in process to be implemented soon, but presently it is still high.
Q: So, what has the experience been? Are you finding that the disposable income, the purchasing power of the consumers has been reducing and that has been impacting companies like LG?
Q: If you could have lunch with the Finance Minister and tell his this is the ideal rate for taxation, this is when consumers will come and buy more fridges and more televisions and more microwaves, what will that ideal tax rate be?
A: It is not tax, but consumers are not rich enough to buy and by paying at once. So, they are looking for some credit or instalment payment. In case of instalment payment, financial scheme is required. So, now, private sectors, consumer financing, it costs high. But, if government offers state run low cost consumer financing facilities, it will be really helpful for consumers to buy.
Q: Do you have that in the rest of the world? Have you seen this take off quite successfully, such schemes?
A: Some countries like Mexico, they have also adopted that kind of governmental, state run consumer financing facilities.
Q: A lot of manufacturers, whether it is an LG or a Samsung, you name them, they are also telling the government, why are you not incentivising us to manufacture here? People can import from China and it is turning out to be cheaper, is that part of your Budget wish list as well?
A: Yes, of course. There are many steps of localisation. Some countries only pretending to localise. Some companies almost 100 percent localisation. Our goal is making LG 100 percent localised company. So, then government should incentivise.