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Govt debt in FY08 equals tax arrears
March, 05th 2007

The government's estimated borrowings for the next fiscal at more than Rs 100,000 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 as 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 100,461 crore," Minister of State for Finance P K Bansal told the Lok Sabha recently.

Officials say in the absence of political will and limitations in the legal process, it is 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, it is 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 per cent higher over Rs 4,42,153 crore this fiscal, while the total expenditure is proposed to be increased by nearly Rs 100,000 crore to Rs 680,521 crore. Over the past three years, the government has recovered over Rs 20,000 crore tax arrears, besides tighening the tax recovery system.

In his Budget, Chidambaram has also proposed to empower the appellate tribunals to dispose of the appeals within a maximum period of one year.

Budget has proposed that with effect from June 1, 2007, if the appeal is not disposed of within 180 days, and subsequently extended period, the stay order will be vacated.

Officials said government would have to take further steps to ensure the recovery of tax arrears.

In fact, tax arrears relating to first security scam in India in the early 60s are still pending and interest is added every year on the amount, though there is almost no chance of recovery, an Income Tax Department official said.

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