Promising a stable tax regime and lower fiscal deficit, Finance Minister P Chidambaram has made it clear that Double Taxation Avoidance Treaties with other countries will remain, but their misuse will be stopped.

"DTAT are well established. There is no reason to

apprehend that DTATs will go. The point is if a case of misuse arises, that misuse must be stopped," Chidambaram said on Friday.

Ruling out the scrapping of DTATs already entered into with various countries, he said, "On the contrary, the CMP affirms that we will have DTATs to ensure that nobody misuses it."

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"We have gone into it in great details. In fact, if you ask me, candidly the misuse that we have discovered in one or two cases is not the misuse by foreign investors but the misuse by some Indians," he said.

India was not the only country that entered into DTAT, he said. "Virtually every country has DTAT with other countries. By definition, we enter into X number of treaties with X number of countries."

The controversy over DTATs surfaced in the late 1990s and early 2000 during Yashwant Sinha's finance ministership when several companies were alleged to have misused the DTAT India has with Mauritius to evade taxes.

Chidambaram also said the government was planning to come up with special schemes to tap black money and improve tax administration to bring down revenue deficit.

Deficit

Even after promising massive public investment in agricultural and infrastructure, he said, "Fiscal Responsibility and Budget Management Act mandates us to wipe out revenue deficit by 2009. Once revenue deficit is wiped out, fiscal deficit becomes extremely manageable."

"Is there any country, which does not have a fiscal deficit? Every country has some fiscal deficit," Chidambaram said, adding that the government will make efforts to bring down the deficits over the years.

The fiscal deficit of the central government is estimated at 4.8 per cent of GDP for 2003-04. The NDA government had targeted a lower 4.4 per cent deficit for this fiscal.

Chidambaram declined to give a number. Hinting at a two-prong approach to tax reforms, stability and moderation, Chidambaram said, "Tax rates would be stable and conducive to growth, compliance and investment."

VAT soon

Referring to the CMP, he said the UPA government had promised an early introduction of value-added tax, which would send a positive signal to trade and industry.

He said the government would unveil its plans of targeting subsidies effectively on the needy within the next 90 days.