Suppose one runs a viable business, should such a business be eligible for tax breaks? In India, if you happen to have such a business and lobby the government to declare it an “infrastructure” sector, then you are on your way to garner tax advantages. The department of telecommunications is pushing hard for tax benefits for telecom companies that began operations after March 2005 under section 80 1A of the Income-tax Act.
Their case is built on the ground that the telecom sector is capital-intensive and contributes a significant share to the country’s economy. That is hardly an argument. By that yardstick any group of private firms can get together and say that they contribute to the economy and, therefore, they deserve a tax holiday. Exemptions should be rare and need to be made only when necessary and not for the gain of private firms.