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FM to squeeze more out of low tax-paying sectors

By BS Reporter
Last updated on: September 04, 2012 10:38 IST
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P ChidambaramFinance Minister P Chidambaram on Monday asked the tax department to go after low tax-paying sectors, saying that could bring an additional Rs 30,000 crore (Rs 300 billion) to the revenue kitty.

The minister said though the applicable tax rate for companies was 30 per cent, the average tax rate came to just 24 per cent and even lower in some sectors.

He said instead of randomly going after taxpayers, most of whom duly paid their taxes, the department should focus on those below-average sectors to see whether the average could be raised to collect more taxes.

"Several sectors are well below the average. In such cases, the average ranges 10-22 per cent.

"Those are the areas I have asked them to focus on. . . . Even if the average is raised from 24 per cent to 26 per cent, we will collect roughly Rs 30,000 crore . . .

"It is important that we approach this matter scientifically and in a systemic way rather than a hit-and-run way," Chidambaram said at a press conference after a meeting with income tax commissioners.

He said the corporate tax rate was 30 per cent and everybody must pay taxes at that rate, but tax expenditure (deductions) and exemptions brought down the average.

He, however, clarified he was not referring to the withdrawal of exemptions as that was the domain of Parliament.

The government had to forgo revenue of Rs 51,292 crore (Rs 512.92 billion) in 2011-12 on account of deductions given to corporate taxpayers.

Units located in SEZs, charitable trusts and institutions, infrastructure facilities, telecommunications services, power generation and distribution companies, undertakings in the small scale sector, and housing projects comprised major taxpayers benefiting from the deductions.

Around 6,000 companies pay 90 per cent of corporate taxes, which constitute 65 per cent of the direct tax collections.

As industrial activity slowed down, corporate tax collections during April-July 2012-13 stood at Rs 83,932 crore (Rs 839.32 billion), lower than Rs 85,222 crore (Rs 852.22 billion) in the same period of 2011-12.

Chidambaram exuded confidence the direct tax collection target for 2012-13 would be met and the collections would pick up in the second half.

He said the September advance tax collection figures would give an indication where the overall collections were headed.

Chidambaram said while GDP growth may have an impact on tax collections, there was no one-on-one correlation.

India's GDP grew 5.5 per cent for the first quarter of this fiscal, a shade higher than 5.3 per cent in the previous quarter.

Image: P Chidambaram

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BS Reporter in New Delhi
Source: source
Related News: Chidambaram, GDP, Parliament, India
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