The Hindu Business Line : Isaac foresees 25% growth in tax revenue

Kochi, Nov. 4 Despite the economic slowdown gripping the country and a greater part of the world, Kerala’s tax receipts are poised to grow by 25 per cent during the current fiscal, the State Finance Minister, Dr T.M. Thomas Isaac, said.

Addressing a select group from the media, he said that accretion to tax revenue would be possible through better tax compliance, greater scrutiny and creation of better tax information base.

New tax policy

The new integrated and comprehensive VAT and sales taxation policy of the State, which was being implemented in stages since August, has already elicited excellent results, the Minister said. On a year-on-year basis, tax collection, which had grown by 17 per cent in July, had surged to 43 per cent in August, by 20 per cent in September and 38 per cent in October despite emerging adverse economic conditions.

Sales tax and VAT receipts had already increased by 24 per cent to Rs 6,275 crore during April-October 2008, as against Rs 5,015 crore collected during the same period last year. And the growth momentum was expected to accelerate in the coming months with the new policy being increasingly integrated and enforced in the State, Dr Isaac said.

This was despite a slow down in overall consumption, sale of vehicles and sale and export of some of the State’s major commercial crops, such as pepper, rubber, cashew and cardamom. The commercial crops alone had contributed close to Rs 400 crore as taxes to the State last year.

The economic slowdown is also beginning to bite on the overall consumption, which would have a cascading impact on the State’s tax receipts as well.

Cutting tax evasion

The new taxation measures are expected to reduce tax evasion, which had resulted in tax collection being reduced to 50 per cent of what was due to the State, Dr Isaac said.

Bulk of the tax evasion was undertaken by not providing bills, billing lower amounts and reducing the taxes collected, as well as by showing higher input tax and lower output tax.

By showing input taxes as being much higher than output taxes, some companies had been seeking waiver and reimbursement, the Minister said. All these were poised to change with the advent of the new tax information base being created in the State.

‘Govt should step in’

Pursuing the Keynesian model, Dr Isaac advocated that the Union and State Governments should pump in capital and resources by building infrastructure. This, he said, had become imperative as there was a crisis of confidence and banks were still unsure of lending to the private sector and the private sector was wary of the high-cost of credit on offer.

The Government initiative would help to kick-start the economy, which had lost momentum in the last three months. The crisis of confidence had emerged as the Government had released close to Rs 3,00,000 crore into the economy through the banking system, but there was hardly any will to extend the credit by the banks, nor the desired interest from the private sector to avail of these high-cost loans.

Dr Isaac said that several States would come forward and avail of these loans and help in the re-building up of economy and infrastructure once the Union Government takes the initiative and some policy impediments are removed.

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