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Finance minister consistent in missing tax targets

P Vaidyanathan Iyer

On February 28, when the finance minister tells you his tax estimates for 2002-03, take it with a pinch of salt. For almost every year, the government's actual tax receipts have invariably fallen short of not only the Budget estimate but also the revised estimate.

The actual collections have every year exposed the finance ministry's over-zealousness in setting lofty targets during the formulation of the budget.

For instance, in 2000-01, the difference was quite pronounced. While Sinha fixed the Budget estimate for net tax revenue (after deducting the states' share) to the Centre in 2000-01 at Rs 1,462.09 billion, he revised it to Rs 1,444.03 (98.7 per cent) billion, subsequently. The actual accrual was, however, Rs 1,353.23 billion or just 93.71 per cent of the RE.

This year is also unlikely to be any different. For the first 10 months, April-January, net direct tax collections stood at Rs 472.87 billion against the full year target of Rs 852.75 billion. Heavy refunds of over Rs 130 billion and the persisting economic slowdown have ensured that direct tax collections are just 55.4 per cent of the BE.

Even on the indirect tax front, collections dropped 3 per cent to Rs 892.88 billion during the first 10 months of the current financial year compared to the corresponding period last fiscal. The indirect tax collections are 63.7 per cent of the target of Rs 1,401.42 billion for the full year.

As of now, officials are claiming that the net tax shortfall in the current year would be about Rs 250 billion. The last instalment of advance (corporation and personal income) taxes is due on March 15.

It is, however, likely that the shortfall would be even higher than what is being currently estimated. In the current year, officials said Sinha might well project the net tax to the Centre Rs 140 billion less than the BE of Rs 1,630.31 billion.

In the last four years, except in 1999-2000 when the actuals were higher by about Rs 20 billion compared to the RE, the actuals have always been lower than the BE and the RE.

The percentage deviation of actuals vis-a-vis the BE has been as high as 15 per cent at times (1997-98).

The deviation of actuals against the RE was the highest in 2000-01 at over 6 per cent.

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