Corruption hit tax revenue: FM Thomas Isaac

Thiruvananthapuram: Ahead of presenting the ‘White Paper’ on State’s Finances, finance minister Dr T M Thomas Isaac has underlined corruption as the fundamental cause of the fall in tax revenues, and consequently the fiscal crisis. “While VAT revenue grew at an average of 17.41 percent during 2006-11, it fell to 12.5 percent during 2011-16,” the finance minister said in the Assembly on Wednesday.

The finance minister ruled out the argument that fall in tax revenue reflected the general slump in the economy. “The fall in VAT revenues had taken place at a time when remittances had swelled and VAT rates have been substantially increased,” Isaac said. The finance minister said that the efficiency of tax administration had deteriorated.

“A reliable indication of this was the fall in the percentage of returns subjected to scrutiny,” Isaac said and added: “The additional demand as a result of scrutiny or audit or visit was also very small,” he said.

 Modernisation has not been carried out in the Commercial Sales Tax Department, the minister said. “The capacity of the Department’s server has not been enhanced. The problems this can caused for tax administration are knotty,” he said.

Revenue from motor vehicles, too, has shown a drastic decline. “A sector that has shown an annual growth of 23 percent during the last many years had virtually stagnated in 2015-16. The growth was only 7 percent,” Isaac said.

The minister said that the Treasury bill holdings was only Rs 1009 crore when the UDF left office. However, he said immediate liabilities like social security pensions, contractor arrears, money owed to welfare boards, and funds held back from departments together add up to nearly Rs 6000 crore. “Another Rs 6000 crore has to be found to meet pending payments for big projects, and arrears of paddy procurement. Then, there is over Rs 4000 crore that has to be passed on to local bodies,” the minister said.