Tax cuts are mere tokenism: Chidambaram

Former Finance Minister P. Chidambaram on Thursday said that the tax cuts announced by Finance Minister Arun Jaitley were nothing but mere "tokenism".

"The tax cuts announced by the Finance Minister are, at best, tokenism. If you do the math, you will find that he has given 1.98 crore tax payers a relief of, on average, Rs 5000 per taxpayer.

"We welcome this relief, but it is a small mercy for a person who stood in a queue for many hours for many weeks in order to withdraw small amounts of money from his or her account," said Chidambaram while briefing media persons.

For individual taxpayers, the tax rate for the slab between Rs 2.5 lakh and Rs 5 lakh has been cut to five per cent from 10 per cent, while a 10 percent surcharge has been kept for those with an annual income of between Rs 50 lakh and Rs 1 crore.

Chidambaram also said the correct tax cut would have been a cut in indirect taxes and it would have benefited crores of people, including industry and business, apart from boosting aggregate demand.

"The tried, tested and the best way to boost aggregate demand is to cut indirect taxes, especially excise duty and service tax, that is paid by every consumer of goods and services," said Chidambaram.

"Such a cut would have also given immediate relief to crores of people. The government has foolishly rejected this option. I am afraid the country will pay a heavy price in terms of poor demand, lower sales, fewer jobs and closures of micro, small and medium enterprises," he added.