“It will be challenging to achieve high revenue targets we have set for ourselves…International economic situation is not very conducive.  Global recovery is very slow and sluggish. Beside, the global oil price is quite volatile causing inflationary trend.

This will adversely impact the economic growth,” Finance Minister Pranab Mukherjee cautioned while addressing the annual conference of Chief Commissioners and Directors General of Income Tax here.

The Income Tax Department has been given a tax collections target of about Rs 5.33 lakh crores, which is at 20 per cent growth over the actual collections of the preceding year 2010-11. The Thirteenth Finance Commission has projected direct tax revenue collection at Rs 8.3 lakh crore by 2014-15 and direct tax GDP ratio at 7.62 per cent.  The Direct tax GDP ratio as of now is 5.66 per cent.

Admitting that these targets are “very steep and challenging” given the current economic situation Mukherjee urged officers of the IT Department to work “very hard” to achieve their tax collections targets for the current fiscal and “strictly” comply with tax compliance regime. Earlier in his remark the Revenue Secretary Sunil Mitra cautioned that the government could miss the revenue collection targets during 2011-12 primarily on account of high inflation and moderating economic growth.

“Inflation can affect domestic demand and thereby adversely affect economic growth and consequently our revenue collection,” he cautioned.

Taking note of Mitra’s views Mukherjee said “he has raised the issue rightly.” Later talking to newspersons Mitra cautioned that any further tightening of monetary policy by the RBI to contain inflation could adversely impact growth of income of corporate sector thereby resulting in a slowdown in growth of corporate tax collection. In response to a query Mitra opposed any reduction in Customs or Excise duty on petroleum products saying such an action could also impact indirect tax collection. Earlier in his opening remarks dwelling on issues like tax evasion and corruption Mukherjee asked IT Department to “vigorously” focus on preventive vigilance and adopt a strategy for “zero tolerance for corruption.”

He suggested that the Department should take all measures as are required for effectively implementing preventive vigilance. Taking note of challenges posed by the generation of illegal income through various anti-national activities, Mukherjee revealed that the government had approved of setting- up a “Directorate of Criminal Investigation” in the IT Department.

“This Directorate will deal with tax crimes related to illegal activities. It will locate crimes or criminals by tracing the movement of money before, during and after a crime is committed,” he said.

This new Directorate will also strengthen the ongoing efforts of the IT Department in dealing with issues of black money, said the Finance Minister. Stressing the need for tracking flow of illegal money—especially money used to fund terrorism—Mukherjee said “the funding of terrorism and its sources are of paramount interest to us.”