The government plans to eliminate tax incentives to increase direct tax collections.
The share of direct taxes in the overall tax-GDP (gross domestic product) ratio has to be increased. The only option left on this front is to eliminate incentives and step up deterrence, revenue secretary P. V. Bhide said at a Ficci seminar.
He said reducing fiscal deficit would help control inflation. However, it is difficult to reduce the deficit in the short run by cutting expenditure, he added.
The only option left with the government is to raise additional resources through direct taxes. Indirect taxes such as customs duties are being reduced to check inflation.
Tax incentives should be given to boost production in the initial stages and then should be removed, Bhide said.
But in India, we remove nothing and that makes things more difficult. So, we will have to look at those which have outlived their utility or which are not functional any more, he added.
So far as deterrent measures are concerned, they have to be taken in a non-intrusive manner.
We are seeking recourse to modern day technology in this regard, Bhide said