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Commentary

Taxes: Still Not Reflecting An Upturn

Indian Tax Revenues, as I’ve said earlier (Where are the taxes?), are not quite reflective of the buoyant mode of the market.

October 2009 data is now out, and total tax revenues are about 9% below last year to date numbers, at Rs. 2.14 trillion (lakh cr.) versus Rs. 2.33 trillion last year.

Taxes: Still Not Reflecting An Upturn

(Click for a larger image)

As you can see, October taxes alone have dipped from 30K cr. to 28K cr. Think about it – October was Diwali this year, which is usually bonus time (so more direct taxes, one would think). But since TDS is paid by the 7th of the next month, it may not count in October just yeat. Diwali was in November last year, so some distortion will be apparent. (Additionally, there was a part of one-time government salary arrears – the fifth pay commission increase – paid out in October 2009, which should have caused an increase in net tax collections; only it doesn’t look that way)

Let’s take a look at the expenditure.

Taxes: Still Not Reflecting An Upturn

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As you can see, expenditure is up about 30% – from 4.08 trillion to 5.37 trillion, year to date. Basically, as a country we are earning less and spending more.

Further down on the page, is the terrible figure for the fiscal deficit. The total deficit now is Rs. 2.45 trillion versus 1.17 trillion last year : that’s nearly a 50% increase in deficit from last year!

If we are really improving, it should show in our taxes. Let’s see what December has in store.

  • Dhruva says:

    >Personally I think we are going the US way getting under lot of debt (in name of development/recovery), which later we will repent.

    I was delighted when congress came back to power but I was shit scared when I saw the budget in July/August by Dr Mukherjee… and saw so much unnecessary spending.

    The congress historically took us to 1990 situation when we were about to go bottom up because of debt.

    I just hope next year's budget will be more rationale and will have less spending. (otherwise we will need to be cautious and see when should we go short on India and probably make money by shorting on India :-))

    Comments?

  • Sivajothi says:

    >It's inflation time. What's your expectation on inflation for nov 09?

  • Deepak Shenoy says:

    >Don't know about shorting now – there will come a time for it I'm sure.

    Food inflation has reached 19% now, which is quite painful. WPI inflation may not be much – about 2% or so – but food inflation is likely to cross 20% easily by next month, I would think.

  • Anonymous says:

    >The data between both the years is ideally not comparable. You need to factor in that the government as part of the stimulus package reduced indirect tax across various categories.

    For Ex: Service tax last year in Oct was applicable at 12.36% whereas it is currently 10.3%. So you need to look at what component of the drop in revenues is on account of this variable.

  • Deepak Shenoy says:

    >True, there are tax differentials due to stimulus packages, and some direct taxes (10% surcharge for inst) and service tax has come down.

    Yet, think about it – we have been growing taxes nearly 30% year on year or more since 2003 – why are we dropping now? If the taxpayer base is really increasing then taxes collected will be higher (especially with GDP growing 7.9%) even with the drop due to reduced percentages.

    The bigger problem is: We are spending a lot more, we are getting a lot lesser revenue. Stimulus is intended to eventually revive taxes – but the question is: how long will we wait?