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TAX RECEIPTS-Gaping Holes

revenue collections under both direct and indirect taxes in the current fiscal year up to August have lagged well behind the expected levels as per the budget estimates. In the case of direct taxes, the corporation and personal income taxes together have fetched Rs 2,666 crore during April- August, showing a decline of Rs 470 crore or 15 per cent over the collections in the corresponding period of last year. This has happened despite the fact that go major hanges in direct tax rates, had been effected in the 1993-94 budget and a rigorous tax collection drive had been promised. The finance minister had specifically indicated that major reform of the corporate tax structure on the lines recommended by the Chelliah Committee would be takeii up in the 1994-95 budget. (In a recent speech the finance minister regretted not having implemented the reforms in the last budget.) It has been suggested that to an extent the reduced net direct tax collection is on account of heavy tax refunds made to banks and financial institutions this year. The refunds have had to be made because of last year's fiscal manipulations. Last year the government forced several pubfic sector financial institutions to contribute additional amounts by way of corporate taxation, knowing fully well that these amounts would have to be refunded the following year. This was done, of course, to meet the target of gross fiscal deficit prescribed by the IMF.

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