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Better tax recovery could have reduced govt's debt
March, 05th 2007

The governments estimated borrowings for the next fiscal at more than Rs 1,00,000 crore could have been reduced further had it been able to recover tax arrears of a similar amount entangled in legal cases.

In the Budget 2007-08, finance minister P Chidambaram has said the government will go for less borrowings next fiscal at Rs 1,09,579 crore against Rs 1,13,778 crore this fiscal. However, this burden could have been eased if the government was able to expedite the more than 27,000 cases going on in various courts across the country.

As on December 31, 2006, the number of cases pending with debt recovery tribunals is 27,250. The amount involved is Rs 1,00,461 crore, minister of state for finance PK Bansal told the Lok Sabha recently.

Officials say in the absence of political will and limitations in the legal process, its not easy to recover the tax arrears pending for the past many decades. The government has to recover tax arrears of around Rs 30,000 crore from companies and persons involved in security scam in early 90s, officials said. There is little chance of recovery in most of these cases as there are not many assets to recover the arrears, they claimed.

But in many cases, corporates have preferred to contest cases in tribunals and courts even to save interests on taxes. The amount stuck as tax arrears is also equal to the additional tax the government hopes to raise next year. Besides, its equivalent to the increase in the governments expenditure during 2007-08.

The government expects to get Rs 5,48,122 crore from taxes in 2007-08, 23.9% higher over Rs 4,42,153 crore this fiscal, while the total expenditure is proposed to be increased by nearly Rs 1,00,000 crore to Rs 6,80,521 crore.

Over the past three years, the government has recovered over Rs 20,000 crore tax arrears, besides tighening the tax recovery system.

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