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February 18, 2014

Better tax compliance, and not more taxes, leads to historic revenue collection for Bengal

Better tax compliance, and not more taxes, leads to historic revenue collection for Bengal

West Bengal`s income generation through own tax revenue is set to grow by about 81.8 per cent between 2011-12 and 2013-14. The West Bengal Finance minister also has not proposed any hike in taxes for the next financial year and is banking on compliance to meet his target.

Tax revenue increased from Rs 22,000 crore to about Rs 40,000-plus crore in a span of three budgets.  The states`s performance has taken tax to gross state domestic product ratio – an indicator of the extent to which growth in the economy is filling government coffers – above 5 per cent. As the rate was stuck around 4 per cent for several years, Bengal ranked at the bottom in terms of tax to GSDP ratio.

Revenue deficit of the state government as percentage of Gross State Domestic Product (GSDP) has come down from the steep 3.7 % during the Left regime. From the Rs 32,000 crore own tax generation in the last fiscal, state revenues has reached the Rs 39,000-mark till February this fiscal.

The Bengal Finance Minister has proposed to do away with professional tax on salaried employees with monthly income of Rs 8,500 or less and small traders with turnover of Rs 5 lakh or less per year. In a sop to the burgeoning middle-class, he reduced stamp duty on properties worth Rs 30 lakh or less to 6% from the existing 7%. He also tried his hand at bringing reforms in the tax structure. He pared the cumbersome professional tax schedule for tax payers from 100 entries to only four.

Pushing the reforms process further, he also abolished inspector raj by doing away with pre-verification visits by sales tax officers to dealer`s place before pre-assessment refund. These steps, he hoped, would ensure better compliance. In his bid to step up measures against tax evasion, Dr. Mitra also proposed to merge range offices and central section (preventive) with the Bureau of Investigation. Dr. Mitra believes the measures would help pull up tax revenue by at least 10% in the 2014-15 fiscal.