Chidambaram asks officials to sharply up direct tax mop up this FY

Monday, Jun 9

NEW DELHI - Finance Minister P. Chidambaram today said he has
asked the Central Board of Direct Taxes to "sharply" raise its tax
collection target for the current financial year that ends March.

"Last year (2007-08), was a very good year. 2008-09 will be
better. The Budget has projected direct tax collection of 3.65 trln
rupees... We will revise it upwards," Chidambaram told reporters after
inaugurating the two-day annual conference of the tax board.
Earlier, an official said the finance minister had asked CBDT
officials to aim for 4-trln-rupee direct tax mop up this year, up 350
bln rupees or 10% from the budget target.

Last year, the government's direct tax collections were at 3.14 trln
rupees, up 36.6% from 2.30 trln rupees in 2006-07.

While the government will not tamper with the tax rates, it is now
expected to aggressively widen the tax base to drive up collections.
A mere 3.0-3.5% of India's 1-bln-plus population pays taxes.

The finance minister's appeal to tax department assumes
significance in the wake of the projected shortfall in indirect tax
collections and fears of slowdown in the economy.

The government has cut customs and excise duties on a number of
items after the Budget for 2008-09 was approved to curb inflationary
pressures in the economy and reduce the impact of high crude oil
prices on state-owned oil marketing companies.

The government is likely to lose about 300 bln rupees on account
of the customs and excise duty cuts this year.

Even as revenues come under strain, the government's expenditure
for the current year is likely to balloon due to waiver of farm loans
and pay hike for central government employees later this year.

The farm loan waiver package and the implementation of the Sixth
Pay Commission report will increase government's spending in the
current financial year by about 405 bln rupees in 2008-09.

Notwithstanding these issues, Chidambaram expressed confidence
India's gross domestic product will grow by 8.5% in the current
financial year. The Indian economy is estimated to have expanded
9.0% in 2007-08--clocking 9.0% or more growth for the three
consecutive years.

 

 

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