Traditional wisdom has it that finance ministers may worry about the impact of inflation on the common man, but it does wonders for their finances. In times of inflation, revenues and profits of both individuals and companies increase and, therefore, so do taxes. But a lot depends on how those taxes are split. A high proportion of indirect taxes, on imports for instance, should yield very high tax buoyancy especially at a time when commodity prices are so high. But if corporate taxes are a large proportion of taxes, and inflation begins hitting corporate profits, as indeed it is, then these taxes don’t grow as well. So, corporate taxes that rose 55 per cent in the first month of the 2008-09, grew by just around 38 per cent in the third month. Income taxes have seen a similar fall in growth, though this is not so easily explained since inflation doesn’t result in salaries falling; customs duty collections which grew 25 per cent in April saw their growth fall to under half in June, probably the result of tax cuts made by the government as part of its anti-inflation battle during the year. As a result, overall tax growth which was 52.5 per cent in April fell to around 21 per cent in June. Of course, the overall fiscal balance still looks rosy since total expenditures in the first quarter were down 6.5 per cent, from Rs 179,900 crore in the first quarter of 2007-08 to Rs 168,939 crore in the same period this year — the fiscal deficit, as a result, was down from Rs 112,404 crore to Rs 86,126 crore respectively. The main reason for this was a sharp compression in non-plan capital expenditure, from Rs 38,479 crore in the first quarter of 2007-08 to just Rs 3,494 crore in the April-June quarter this year. Presumably this is a statistical blip and will rise in later months. Inflation’s going to hit the finance ministry soon. 

New Ipad Application :Business Standard's all new IPad App Click here to download for free Other Stories      - S&P reaches 7-month high before hitting wall - World Bank President Zoellick to step down on June 30 - Oil cos cut jet fuel prices by Rs 350/kl - Telcos operating profit to rise 5% in 2 yrs: Crisil - PESB recommends SS Narsing Rao for CIL's top slot

Read Business news in  Advertisements -  Now property search gets more exciting than ever before! -  IndianOil Citibank Card at Zero annual card fee -  We live for our family. have you secured them? -  Earn fuel worth Rs.2400 with Citi -  India's No. 1 Property Site. Click here to know more.. -  Diseases earlier, Saving Costs, Extending Lives. Know More.. -  Win a Business Class Ticket to Europe..Know more.. -  Enjoy the journey as much as the destination. click to know more.. -  Exim Bank Conclave on India - Africa Project Partnership. Know more.. -  Medium-sized businesses are the engines of a smarter planet. -  Be part of it The World's Largest Aircraft. -  Creating Wealth made simple the SIP way. Know more.. -  Only Developer to give a guarantee on time space & rate. -  Office 365 for professionals and small businesses. -  Buy Your Property with Our Triple Guarantee in India. -  Improve Patient Care & Experience. Click here to know more -   Introduce a New Automotive Luxury Car.. know more -  Health is Wealth..... Insurance + Savings... Know More...