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New taxes on the horizon - Views on News from Equitymaster
 
 
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  • Nov 8, 1999

    New taxes on the horizon

    A leading national daily has reported that the government is planning to introduce a bill containing proposals to mop up more taxes in the winter session of the Parliament.

    Tax mop up (April - October)

    Recently released data shows that the government's tax collections jumped 14.2% in the first seven months of the current fiscal year. This should normally have come as a surprise in view of the dull economic conditions prevailing in India. However, the finance minister had factored in gross tax revenue of Rs 1,675 bn, and the collections during the first seven months of the year amounted to just 48% of the target. Added to this, is the jump in expenditure mainly as a result of the Kargil war. As a result, we are faced with the prospects of a burgeoning fiscal deficit, which under the new method of calculation has been set at 4% of GDP.

    One of the proposals being considered by the government is the taxation of export earnings, or at least a part of it. Given that exports amounted to Rs 1,440 bn in the previous year, taxing them could be lucrative. However, what needs to be considered is that an imposition of tax may dilute the competitive advantages Indian exporters enjoy.

    The fiscal situation is a matter of concern for all. However, a better way of financing it could be from the proceeds (a part of it) received from the divestment of holdings in public sector companies. Also, the government should take measures to ensure that its administration and other non-plan expenditure are kept under check.

     

     

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