Taxing to the hilt

The state budget for 2010-11 presented by chief minister B S Yeddyurappa, who also holds finance portfolio, in the state Assembly on Friday, is devoid of any fresh thinking or imagination. While admitting that the state’s own tax revenue is more than 10 per cent of the Gross State Domestic Product, “which is the highest in the entire country,” as against a national average of less than 6 per cent, he has imposed additional taxes to the tune of nearly Rs 2,000 crore. The hike in value added tax from 12.5 per cent to 13.5 per cent on nearly 540 commodities will add to the inflationary pressure when the common man is already suffering from high prices of food articles. The motor vehicle taxes have also been increased substantially, to take advantage of the recent spurt in sales of two and four wheelers.

 The point to be noted is that the winds of change that have characterised the budgetary exercises at the Centre in the recent past -- which have brought handsome returns on lowering of tax rates -- seem to have missed Karnataka completely as the state still wallows in the old mindset of excessive taxation to squeeze more out of the common man. The chief minister has admitted a revenue shortfall of as much as Rs 3,300 crore during 2009-10. Perhaps the way forward would have been to lower the tax rates which usually ensure better compliance and higher revenue realisation. For the year 2010-11, the chief minister has projected a revenue surplus of Rs 500 crore on total estimated receipts of Rs 53,639 crore. This appears ambitious. Excise remains the biggest hope for revenue accretion as the state expects a growth of 10 per cent. He expects to mop up Rs 7,500 crore through state excise collections.

Given the constrains of economic slowdown and the battering that the agriculture sector received due to unprecedented floods during the year, Yeddyurappa has tried to allocate the available funds more judiciously. It is laudable that the social services constitute 38 per cent of the total expenditure, with education (Rs10, 505 crore) and health and medical education (Rs 2,673 crore) getting substantial hikes. The government has proposed many innovative schemes to perk up the agriculture sector, including ‘Jalasiri’ a water harvesting  scheme. The ‘Nirantara Jyoti’ scheme to improve electricity supply to irrigation pump sets and rural habitations, will be extended to 70 more taluks with an investment of Rs 1,200 crore. But, overall, the conservative approach seems to be a bane that afflicts this budget and earlier the state comes out of it the better it will be.