Whether the government which has collected much money through tax collection owing to the emerging economic boom has actually managed to uplift the poor and backward classes or not is debatable. The direct tax collection during April-15 December 2007 of the current financial year, at Rs 164,165 crore, was a whopping 42 per cent higher than what the government collected in the same period last year. Both corporate tax and personal income tax went up this year by 42 per cent, while the former had the lion’s share by contributing Rs 98,391 crore. Since the buoyancy in tax revenue is linked directly to higher surplus generated by companies, “profit” is not a dirty word any more. It is also encouraging to see that the government’s effort to widen the tax net by roping in new tax payers is also yielding positive results. Surely, reduction in exemptions, available earlier under several heads, has also led to less tax evasion and better compliance. Moreover, a host of new taxes like fringe benefit tax, securities transactions tax, banking transaction tax, service tax etc, aimed at broadening the tax base, are also helping fill up the coffers. The securities transactions tax at Rs 5,895 crore this year, for example, was 74 per cent higher than last year, thanks to booming stock indices and renewed interests of retail investors in them.
Looking at the present positive trends in the economy – high growth in industrial production and corporate profits – it is more or less certain that the financial year 2007-08 will end with a record revenue collection. But higher collection in itself does not bring in economic gains unless the money is spent on development projects efficiently and on a time-bound program. It is common knowledge that a huge part of government’s money is wasted in non-developmental expenses and for running the humongous government machinery which add very little value to common peoples’ lives.
A lot of money is also spent on subsidies. Apart from political pressure by coalition partners, the government’s efforts are limited by many factors like rising food subsidy due to large stocks of food grains and higher support price, inability to raise prices of petroleum products like LPG, diesel and kerosene. Clearly, despite a robust growth in tax collections government’s finances will remain under pressure.
