Rich must pay more taxes, says Chidambaram

Home minister P Chidambaram today said the rich should be taxed more in order to achieve the aim of inclusive growth.

Perhaps intruding into the territory of finance minister Pranab Mukherjee, Chidambaram told a function of the All India Management Association in New Delhi, "I am the finance minister who slashed your tax rates. And I am now suggesting that you (the rich) pay higher rates."

Chidambaram was the union finance minister between May 2004 and November 2008; and his initial two or three annual budgets were widely applauded as 'dream budgets', in which he slashed taxes.

As preparations for finalising the 2012-13 union budget get under way, Chidambaram said, "We must raise the tax revenue to raise our non-debt revenue. I know my suggestions will not receive popular support, but I think I can summon the courage to make the statement."

He said that in the initial years, capital formation was important, and this required slashing tax rates. "But, today, capital formation, both locally and internationally, is no longer a challenge," he said.

According to the approach paper to the 12th Five Year Plan, tax revenue is expected to rise from the current 7.4 per cent to 8.9 per cent next year, while non-tax revenue is expected to decline from 14 per cent of GDP in the current year to 13.11 per cent, resulting in a decline in aggregate resources.