Tax demands fail to yield desired results

16% jump in unrealisable tax demands that are not under dispute.

The revenue department is facing difficulties in collecting even undisputed tax demands as many defaulters don’t have sufficient assets.

The Budget estimates show a 16 per cent jump in unrealisable tax demands that are not under dispute and are due for between one and two years. The value of such demands has gone up to Rs 13,440 crore in 2007-08 as against Rs 11,582 crore in 2006-07.

“The reason is that many defaulters refuse to pay, have no assets, or their assets cannot be traced. The other major factor is that the defaulters cannot be traced,” said a senior revenue department official.

The demands relate to direct taxes (corporation tax and personal income tax) and indirect taxes (Customs duty, excise duty and service tax). Undisputed direct tax demands not realised and pending for between one and two years rose 24.7 per cent in value to Rs 11,179 crore in 2007-08 as against Rs 8,960 crore in the previous fiscal. However, undisputed indirect tax demands not realised declined marginally during the period to Rs 2,261 crore from Rs 2,622 crore.

Total demands not under dispute (including tax dues of over two years) has gone up 17.5 per cent in value to Rs 39,699 crore in 2007-08 compared with Rs 33,769 crore in 2006-07.

The value of total tax demands raised but not realised, including disputed cases, went up 4.5 per cent to Rs 103,808 crore in 2007-08 as against Rs 99,293 crore in the previous fiscal. The official said over the years, the realisation from demands had been coming down, “One key reason for this is stay petitions in tribunals and courts,” added the official.

However, as a percentage of gross tax revenue, the unrealisable tax demands have come down from 21 per cent in 2006-07 to 17.5 per cent in 2007-08, which may be attributed to good corporate profitability during that period.

With economic downturn affecting the profitability of India Inc, the amount of unpaid taxes could rise as more companies would find it hard to sustain their operations.