The government could miss the revenue collection targets during 2011-12 mainly on account of high inflation and moderating economic growth, a senior Finance Ministry official said here on Tuesday.
“Inflation can affect domestic demand and thereby adversely affect GDP growth... and consequently our tax collection”, Revenue Secretary Sunil Mitra said while speaking at the annual conference of chief commissioners and directors general of income tax.
Mr. Mitra opposed any roll-back of customs or excise duty on petroleum products and said such an action could also impact indirect tax collection.
“Any roll-back of customs duty on crude oil or of excise duty on petroleum products on account of rising crude prices or on account of deregulation of diesel prices will significantly impact our indirect tax collection as well,” Mr. Mitra said.
“Given these possibilities, I have serious apprehensions in respect of our tax revenue collection this year,” he added.
Finance Minister Pranab Mukherjee, who was also present during the event, concurred with Mr. Mitra’s views. “He (Mitra) has raised the issue rightly... situation is not conducive,” he said.
Mr. Mitra, in his speech, also said that while the last fiscal has been a good year for tax revenue collection, the same may not be true in 2011-12.
“I would like to sound a note of caution in respect of targets for direct tax that has been set for this year at Rs 5.32 lakh crore,” Mr. Mitra said.
The direct tax target numbers for this fiscal are pegged 24 per cent higher than the budget estimates of last year and 19 per cent over the actual collection of 2010-11.
“From present indication it seems likely that inflation driven by international commodity prices could be a major anxiety this year,” Mitra said.
The RBI, in its monetary policy for 2011-12 released earlier this month, had said that international commodity prices are a major area of concern.
It had projected headline inflation to average 9 per cent during the first half of the fiscal, before moderating to around 6 per cent by year-end.
Headline inflation has been above 8 per cent since January 2010. As per latest data, it stood at 8.66 per cent in April this year.
Mr. Mitra said that any further tightening of monetary policy can impact growth of corporates’ income resulting in a slowdown in growth of corporate tax collection.
The RBI has already hiked interest rates nine time since March 2010 and experts believe more rate hikes are on the cards as the apex bank struggles to curb demand and tame inflation.
“A direct factor of anxiety is the increase in international prices of crude oil,” Mr. Mitra said.
Global crude prices are currently trading at over USD 100 per barrel on account of political conflict in the Middle East and North Africa region.