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FM sees big rise in tax collection

October 28, 2004 15:56 IST

Despite apprehensions of a lower economic growth, Finance Minister P Chidambaram on Thursday hoped that a robust revenue collection would help attain a higher tax:GDP ratio of 10 per cent this fiscal after a gap of 20 years.

"This fiscal, if all goes well and all of you pay your taxes by October 31 and continue to pay taxes in the remaining part of the year, we hope to cross tax:GDP ratio of 10 per cent once again," Chidambaram said addressing a Confederation of Indian Industry conference in New Delhi.

The projection on tax collections comes four months ahead of the Budget for 2005-2006, which is expected to spell out major tax reforms.

India's tax:GDP ratio, an important parameter to judge the financial health of the government, was as high as 10.11-10.61 per cent during the second half of 1980s.

"But in 1990s, tax:GDP ratio dipped and came down to 8.2 per cent in 2001-02 due to sharp cuts in tax rates – Income-Tax, Customs and excise duties," he said.

Last fiscal, tax:GDP ratio was at 9.2 per cent mainly due to robust revenue collection backed by impressive economic growth of 8.2 per cent.

The higher tax:GDP projection from the finance minister comes amidst Reserve Bank's warning in the credit policy that economic growth may be lower at 6-6.5 per cent mainly due to oil price pressures and inadequate monsoons.

RBI, however, saw a silver lining in the corporate sector, whose results have been good this year. This means higher corporate and income tax collections.


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