Ever since Chidambaram's dream-turned-to-nightmare
Budget of 1997-98, the Central Government's Budgets
have been characterised not only by an unwillingness
to raise more taxes, but also by a subsequent inability
to reach the levels projected in the Budget in terms
of actual tax receipts. Indeed, the failure of revenues
to reach the Budget targets has been a significant
feature of Yashwant Sinha's Budgets as well. This
year promises to be no exception, if current trends
are accurate indicators. In the first eight months
of the year, tax revenues were well below expectation,
and even lower than for the corresponding period in
the previous year, which was finally marked by a very
substantial shortfall over the whole year. Of course,
data just released by the Ministry of Finance do suggest
that there has been some increase in tax receipts
in December, which would cause the picture to be less
gloomy.
Chart
1 >> Click
to Enlarge
Chart
1 shows the picture for various types of tax receipts
over April-December 1998 and 1999 respectively. The
month of December alone experienced a 28 per cent
increase in total tax collections over December 1998,
and this has contributed to a very respectable increase
of 17 per cent over the entire period April-December
1999 over the same months of the previous year.
As Chart 1 shows, this increase has been spread across
the various categories. Indirect taxes show the highest
rate of increase, but it should be noted, however,
that much of the increase in indirect taxes has come
about simply because of the rise in international
oil prices, which has allowed for higher duty payments
at a given ad valorem rate.
However, even corporate taxes, which had hitherto
been rather flat, have increased by 13 per cent. Predictably,
this news has been hailed by official spokespersons
as being positive on two levels : first, because it
suggests that industrial recovery is now under way;
and second, because more revenue intake presumably
implies a lower fiscal deficit, which is currently
seen as unambiguously good in official circles.
But even though the current level of tax receipts
represents a substantial improvement over last year's
performance over these months, it is still much short
of the Budget projections. The latest data available
from the office of the Controller General of Accounts,
which is the final authority on Indian fiscal information,
covers only the period to November 1999. But this
suggests that the gap between projected and actual
receipts in the current year is still at least as
large as it was last year, when a major shortfall
was ultimately the result.
Chart
2 >> Click
to Enlarge
Chart 2 displays the revenue receipts of the Central
Government over April-November 1999, relative to the
Budget estimates. Especially for net tax revenue,
in the first eight months of the financial year, receipts
were less than half of the Budget expectation. In
Chart 3 the per cent of actual receipts to Budget
estimates is shown for the period April-November for
the current and previous fiscal years. It is clear
that even in comparison to a famously "bad"
year in terms of failure to meet tax revenue targets,
the first eight months of the current year have been
no better.
The recovery in December 1999 is likely to make this
picture only slightly better overall. This is because
December is in any case typically a month in which
tax collections pick up, and even in 1998-99 there
was an increase especially in this month. This is
evident from Chart 4 which shows the monthly pattern
of tax collection.
Chart
3 >> Click
to Enlarge
Chart
4 >> Click
to Enlarge
