Survey expects gross tax revenue to revive its share in GDP to 10.8%.
Rising corporate income tax and service tax collections have boosted the government’s expectations of increased tax revenues that will give rise to better growth prospects of revenue-led medium-term consolidation, according to the Economic Survey for 2010-2011.
In 2010-2011, the gross tax revenue was expected to account for 10.8 per cent of the gross domestic product (GDP), after declining to 10.8 per cent and 9.6 per cent in 2008-09 and 2009-10, respectively, the survey indicated.
The report also highlighted significant changes in the composition of taxes in this financial year compared to the last couple of years. It said a surge in excise duty collections coupled with a rise in corporate income tax and service tax receipts have fuelled hopes of considerable tax earnings in 20010-2011.
“This estimated level of growth in tax revenues seems likely given the recovery in the economy to the pre-crisis levels and the fact that it was at the same levels before the crisis. Thus, it is critical to anchor expenditure reforms to realise the projected deficit levels,” the survey said.
Excise duties had fallen by a big margin in 2009-10 on account of a reduction in duties and slowdown in demand. However, this trend was seen reversing in 2010-2011 with “partial restoration in rates and surge in demand”, it added.
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However, in order to sustain such high level of tax revenues, the survey has suggested certain important fiscal discipline in terms of rationalisation of food, fertilisers and oil subsidies.
The survey has also indicated rapid lowering of fiscal deficit levels. It has projected fiscal deficit to come down to 4.8 per cent (Budgetary Estimates) of the GDP in 2010-11 from 6.3 per cent in 2009-10 (provisional) and 6 per cent in 2008-09.
The survey said the combined deficits of state governments indicated an overall consolidation process in states. The combined fiscal deficit of states was estimated at 2.5 per cent of the GDP for 2010-11. It noted that a surplus on revenue account was recorded between 2007-08 and 2008-09. Revenue receipts grew at 17.6 per cent and 10.7 per cent for 2007-08 and 2008-09, respectively.
“Buoyant revenues of the states and non-tax receipts combined with moderate growth in revenue have helped in this regard. However, there are significant variations among states in respect of these indicators,” said the survey.