After Prime Minister Narendra assured bankers of his government’s backing to fearlessly extend loans for genuine business needs, finance minister Nirmala Sitharaman has sought to reassure Indian industry of a favourable tax regime. Sitharaman said on Saturday at the Hindustan Times Leadership Summit that her administration is working to simplify the tax structure by removing all "ifs and buts", and that the country is moving towards a "harassment-free taxation structure".

Her comments seem aimed at easing concerns over allegedly undue regulatory action by the tax authorities. Even if only allegations, such cases could end up spooking businesses and stifling commerce. A debate on the issue has heated up lately after industrialist Rahul Bajaj alluded to a dampening effect of fear on the economy. Emotions are not very amenable to quantitative surveys and assessments, so there would be rather few ways for the Centre to verify the depth or breadth of any anxiety. Even so, it is a sign of responsive governance that Modi and Sitharaman have so pointedly addressed credit and taxation worries.

The "ifs and buts" that the finance minister referred to was a signal of the government's intention to simplify the tax structure by removing a web of exemptions and cesses that have ended up complicating our tax laws, even new ones like the goods and services tax. With central finances stretched, many complexities owe their existence to exigencies of revenue-raising. But simplicity is a primary canon of taxation, under which only a tax that is easy to grasp and pay can be deemed fair, and reforms must achieve the best we can on this parameter at the earliest. If done, the scope of harassment would fall and the collection of taxes could rise. With expectations stirred up, Sitharaman’s next budget will be watched keenly for its fiscal design.

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