Capital market experts call for tax reform ahead of Union Budget 2024

Union Budget 2024: As Finance Minister Nirmala Sitharaman is set to announce the Union Budget 2024 approaches, capital market experts Sushil Kedia and Ajay Bagga, in an exclusive conversation with Arnab Goaswami, Editor-in-Chief, Republic Media Network, have voiced concerns regarding India's complex taxation system and its impact on market sentiment and business forecasts.

Sushil Kedia, founder of Kedianomics, mentioned that the current tax system, with its multitude of taxes, places an undue burden on wealth creators. "There are too many types of taxes," Kedia remarked. "Despite the Prime Minister's statement about supporting wealth creators, the reality is that the tax system has not been streamlined to reflect this support. The variety of taxes we pay seems to treat making money as a burden rather than a benefit."

Kedia's concerns echo those of fellow market expert and investor Madhu Kela, who has also highlighted the need for simplification in the tax structure. According to Kedia, the complexity and variety of taxes create an environment where both potential gains and losses are part of the economic landscape, underscoring the need for a rational and realistic taxation system.

Ajay Bagga, a leading market expert, pointed out the major impact that inconsistent tax policies have on investor sentiment. "In developed markets, there is typically a three-year window of policy continuity," Bagga explained. "Frequent changes to tax policies can undermine market confidence and disrupt business forecasts. While foreign investors benefit from double taxation avoidance agreements, retail investors and local market participants, including investors like Kedia and Kela, face a non-level playing field."

Bagga highlighted that continuous tinkering with tax policies can damage investor sentiment and hinder business planning. "Business models are built on forecasts of taxes, and consistent changes can destroy sentiment," he warned. He also noted that while the focus is often on high-net-worth individuals and foreign investors, the middle class has not seen the promised tax breaks since 2014.

As discussions about the Union Budget 2024 intensify, both Kedia and Bagga stress the need for a more stable and simplified tax system to foster a more equitable and predictable environment for all market participants.

(Source: Republicbiz)