Market meltdown may dash tax payers' hopes

NEW DELHI: The recent market meltdown is widening its net now. The bear phase on stock markets may lead to a possible slowdown in tax collection between January 1 and February 15, 2008, which, in turn, may dash tax relief hopes of millions of payers during the coming Budget.

In fact, if the stock market keeps low for some more time, the total tax collection during January-March 2008 could be hit hard. Finmin sources told SundayET that the bear market might impact the total tax collection of the last quarter of the current fiscal.

“Till now, there has been buoyancy in tax collection this fiscal. However, the recent downturn of the stock market may dampen the growth in tax collection in the last three months of the current fiscal. Any decision on tax cut will be taken after analysing the tax collection pattern till February 15 this year.”

In fact, direct tax collections continued to record a growth of about 41% for the period April, 2007 to January 15, 2008. The growth in direct tax collection, much beyond last year’s Budget estimates, led most analysts to believe that finance minister P Chidambaram may give some relief to tax payers during the forthcoming Budget.

When contacted, R Prasad, chairman, Central Board of Direct Taxes (CBDT) refused to comment on any Budget speculation. “I won’t be able to comment anything on the Budget. But yes, a bull market always encourages people to pay more tax. That’s a global phenomenon. And by that logic, a bear market should impact the total tax collection. But we have not analysed so far whether we have been hit by the current market situation or not,” he said.

Significantly, the net tax collection between April 1, 2007, and January, 15, 2008, stood at Rs 2,17,149 cr, up from Rs 1,52,993 cr during the same period last fiscal, registering a growth of over 41% and achieving about 81% of direct tax target of Rs 2,67,490 cr for this fiscal. The growth in Securities Transaction Tax (STT) was 78% (Rs 6,793 cr against Rs 3,812 cr) during the same period.