Budget to tone up tax administration

New Delhi, Jan 4 | Updated: Jan 5 2006, 05:35am hrs
With little scope left for hiking tax rates, Budget 2006-07 is likely to embark on a comprehensive plan to tone up tax administration so as to step up revenue mobilisation, even as it works towards aligning import tariffs with Asean levels.

The major effort would now be to substantially improve tax administration, a senior government official said, adding there was little scope to tinker with the rates as there was a commitment to maintain stable tax rates.

In line with the recommendations of the Kelkar panel, the phasing out of some unwanted exemptions would continue, he said but felt there was not much scope for large-scale removal of exemptions as many of them have already been done away with. With compulsions of coalition politics, the finance ministers hands are already tied in removing exemptions, especially those pertaining to export and social sectors. All over the world, tax exemptions are given to making industry competitive, the official said.

Regarding import tariffs, there is a commitment to bringing them down further to align them with Asean levels and this would continue this year, the official said. He added the effort on excise duty would be to move towards a single rate.

Now there are only two itemsautomobile and soft drinkswhich attract 8% special additional duty. The toning up of tax administration would include utilisation of tax information network to check tax evasion in indirect taxes as well, besides tightening measures to make evasion and tax avoidance difficult.

Last year, the Budget came up with a new tax, banking cash transaction tax, to keep tabs on cash withdrawals in a bid to check black money. This Budget too, there could be some such device in indirect taxes to check excise duty evasion.

PTI