THIRUVANANTHAPURAM: Kerala Finance Minister T. M. Thomas Isaac has virtually unveiled a `carrot-and-stick' policy targeted at traders in the State offering them huge incentives for tax compliance and heavy penalties for non-issuance of bills to consumers. The measures would come into effect from November 1.
Dr. Isaac, who was fielding questions after a presentation questioning Union Finance Minister P. Chidambaram's claim on the floor of the Lok Sabha last month that States are not spending enough despite their being cash surplus, said the Government would insist on issuance of bills for all transactions and that it had promised the traders substantial contributions to the traders' welfare fund if they contributed to the State's tax revenue through better tax compliance. If the traders helped the State raise its tax revenue from the present Rs.3,000-odd crore to around Rs.4,500 crore, the Government would consider earmarking as much as Rs.100 crore to the traders' welfare fund, he said.
He also made it clear that beginning November 1, the traders who failed to issue bills would be visited with a penalty of Rs.1,000 in the first instance and penalty in its multiples in the subsequent instances, culminating in the forfeiture of licence if a trader was caught the tenth time not issuing bills. The Government, he said, was happy with the way the traders had responded so far to the new tax regime and expected the buoyancy to persist in the months to come. Revenue from Value Added Tax (VAT) last month had grown by 65 per cent and it was expected to grow by 70 per cent this month. Only twice in the State's history had this happened, the first in 1957-'58 when C. Achutha Menon was the Finance Minister and the popular fervour was at its peak and, later, during the Emergency.
Mr. Isaac said the Left Democratic Front (LDF) Government had already made it clear that its focus would be on improving the State's revenues rather than going in for mechanical application of the Centre's prescriptions for reducing the State's Revenue Deficit and Fiscal Deficit. The measures it proposed to take included treatment of VAT rates as floor rates with higher rates being made applicable to specific goods, plugging loopholes in tax collection, strengthening the tax collection mechanism and ensuring popular involvement in tax revenue generation.
The Government, he said, was considering a proposal to set forth `physical targets' or `outcome targets' for the funds that it spends and come out next year with a document evaluating the quality of Government expenditure in different sectors.