Call to broaden State's tax base

By Our Special Correspondent

BANGALORE, FEB. 12. The Tax Reforms Commission has bitter facts to reveal on the soundness of the State's finances which contradict the claims made by those in the administration.

The commission, headed by the former Chief Minister, Mr. M. Veerappa Moily, today presented its first report to the Chief Minister, Mr. S. M. Krishna, here. It called for, among other things, broadbasing the State's tax base and improvement of revenue productivity.

It is the first such report to be published in the State. Hitherto, governments headed by the Janata Dal or Congress, had come out with White Papers on the State's finances which only faulted the previous governments for their handling of financial affairs. A similar commission on tax administration, headed by the late S. Bhoothalingam of the ICS, had submitted its report in the mid-Sixties.

The Tax Reforms Commission did not reveal the recommendations it has made to the Government on the ground that some of them were going to be incorporated in the coming State Budget. It would come out with a fuller report once the Budget was presented. It was likely to submit its final report in June.

Besides Mr. Moily (Chairman), the members of the commission constituted in April 2000 are Dr. M. Govind Rao, Director, Institute of Social and Economic Change, Bangalore; Dr. B. S. Srikantaradhya, former professor of Economics, University of Mysore; Dr. R. V. Dadibhavi, Professor of Economics, Karnatak University, Dharwad; Dr. Parthasarathi Shome, RBI Professor, Indian Council of Research in International Economic Relations, New Delhi; and Dr. Renuka Vishwanathan, IAS (Member Secretary).

Speaking to presspersons after presenting the report, Mr. Moily said that revenue collection in the State had been hit by non- compliance which was of the order of 50 per cent of those liable to pay taxes, corruption in collection and widespread evasion. Citing the case of State excise, he said that the tax evaded was on a ``conservative estimate'' 150 per cent of the actual collections. As against collecting Rs. 2,450 crores of excise revenue a year, the State had settled for Rs. 1,000 crores. But he could not provide statistics regarding evasion in respect of commercial and other taxes.

Mr. Moily said that there was a decline in the ratio of tax resources to the Gross State Domestic Product (GSDP) from 12.8 per cent in 1991 to 9.8 per cent in 1999. The liabilities of the State were exceeding the assets. The fiscal deficit, which was 2.4 per cent of the GSDP in 1991, had increased to 3.45 per cent in 1999.

The other factors for the revenue deficit were the increase in Plan and non-Plan expenditure, revision of pay-scales of government employees and also pensions and increased debt servicing. Mr. Moily urged the Chief Minister to convene a meeting of at least the Chief Ministers of the southern States on the introduction of Value Added Taxation from April 1, 2002.

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Section  : Southern States
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