'Borrow to meet deficits, not impose higher taxes': Chidambaram

Former Finance Minister P Chidambaram on Wednesday said that the governments must borrow to meet their deficits and not resort to imposing new or higher taxes amid the coronavirus crisis.

Chidambaram said imposing higher taxes should not be done at a time when the economic activity in the country has "ground to a halt".

"New or higher taxes will impoverish families further. Governments must borrow to meet their deficits, not impose higher tax burdens when economic activity has ground to a halt," Chidambaram tweeted on Wednesday.

He said the imposition of new or higher taxes makes sense only when the economy is booming.

"Tax burdens on the middle class and poor is actually taxing distress," the former finance minister said.

"We have been pleading for cash transfers from the government to the bottom half of the people/families. Instead governments are doing a REVERSE TRANSFER of money from the people to the government! Cruel," he added.

Earlier this week, the Kejriwal government announced an increase in value-added tax (VAT) on petrol and diesel to raise money to fight the coronavirus disease. This decision had increased the price of petrol by Rs 1.67 per litre to Rs 71.26 and diesel, by Rs 7.10 to Rs 69.39.

The Centre on Tuesday raised the excise duty on petrol by Rs 10 and on diesel by 13 per litre to recoup some of the loss of revenue suffered by the government due to the Covid-19 lockdown. However, the change in the tax structure will not impact the retail sale price of petrol and diesel on account of the excise duty hike.

Besides this, some of the states, including Delhi, Andhra Pradesh, West Bengal and Rajasthan, had announced an increase in the excise duty for liquor as alcohol stores lifted shutters after nearly a 40-day lockdown on Monday. Delhi increased the tax by 70%, Andhra by 75%, West Bengal by 30% and Rajasthan by 10%, all to raise funds to fight the pandemics and manage state finances, the governments said.

(Inputs from hindustantimes.com)