Budget 2014-15: FM's revenue numbers are pie-in-the-sky

One of the delightful mysteries of P Chidambaram’s budget math is that he expects a whopping 19 percent jump in gross tax receipts when it actually fell 6.3 percent in 2013-14 from the budgeted estimate. So he is essentially saying that gross tax receipts (GTR) will go from -6.3 percent to plus 19 percent – a 25 percent turnaround in a year in which no one is expecting a spectacular rebound. Who is going to give him – or, rather his successor – this tax bonanza? The answer is you and me – assuming Chidambaram’s sums are anywhere near correct. [caption id=“attachment_1395595” align=“alignleft” width=“380”]  Will the taxpayer be left holding the bill? Reuters image[/caption] In the 19 percent total growth in gross tax receipts, corporates are not going to do much. The expected growth in corporation tax receipts is 14.5 percent. Excise and customs will grow at 11.7 percent and 14.9 percent. This means India Inc and its small sector brethren are not going to do the heavy lifting to give Chidambaram his 19 percent cent growth in GTR. So if the big taxpayers – basically corporate India – are going to deliver less, who will deliver more? The short answer is you and me – and rich individuals. For the growth expected in income taxes is a phenomenal 26.8 percent – yielding over Rs 3,06,466 crore in 2014-15. Since the budget did not announce any increase in taxes, is he hinting that taxes may rise after the regular budget in July? Another motherlode of tax revenue is service tax – which is expected to grow by an even more heftier 30.6 percent to Rs 2,15,478 crore. This will make services the biggest generator of indirect tax revenue, overtaking excise and customs in 2014-15. But the moot point is whether services are going to yield this kind of moolah when it has been slowing down of late. At a press conference later, when Chidambaram was asked how he planned to raise 19 percent more when the economy is still to recover, his bland answer was he was setting targets high so that his tax collectors try harder. But setting stretch targets is one thing, making them unrealistic is evidence of creative accounting. Moreover, the high projected revenue growth rates come against the backdrop of an actual decline in revenues under all tax heads – corporation tax, income tax, excise, customs and service tax - between the budgeted estimate for 2013-14 and the actuals. GTR fell by 6.3 percent between the budget estimate of 2013-14 and the revised figure presented today. Is Chidambaram is trying to jump from abysmal performance to pie-in-the-sky growth projections?