Year's central direct tax collections fall well short of even reduced target

The Centre’s direct tax collections for the just ended fiscal year 2008-09 is likely to fall short of the target by about Rs 14,000 crore, as economic slowdown seems to have adversely impacted corporate taxpayers.

Lack of adequate staff, non-cooperation from banks and large refund claims against corporate taxes paid earlier are the other reasons cited. It is the shortfall in the target for Mumbai, where 40 per cent of all collections come, which seems to have been primarily responsible.

This overall shortfall, if not compensated by corresponding fall in spending, will increase the Centre’s fiscal deficit by 0.25 per cent of Gross Domestic Product (GDP). The interim budget presented in February had estimated it at 6 per cent for fiscal 2008-09.

As on the last day of FY 2008-09, tax officials said all-India direct tax collections stood at Rs 3,29,000 cr, as against the interim budget target target of Rs 3,45,000 cr. (The figure of collections may go up by another Rs 2,000 cr, through final adjustments). The target stated when the budget was presented in February 2008 was even higher, at Rs 3,65,000 cr.

Mumbai, which contributes around 40 per cent of total direct tax collections, had collected only Rs 1,15,000 cr as on March 31, 2009 as against the revised target of Rs 1,35,000 cr. The earlier target was Rs 1,50,000 cr. In other words, the target for the rest of India has been more than achieved.

Except for the public sector firms, other sectors like auto, construction and hospitality have fared badly, said sources.

Some of the reasons cited by officials for less collection are the lack of field strength of officers at the ground level. “Even if the department conducted numerous searches, the staff strength was never enough to follow up,” said an official.

The department has also gone to the extent of complaining against two major banks for non co-operation in tax collections. It has formally communicated to the Central Board of Direct Taxes against State Bank of India and Hongkong and Shanghai Banking Corporation ( HSBC) for alleged failure to cooperate in attaching fixed deposits of assesses.

Higher refunds against corporate taxes are another reason cited by officials for less collection.