Revenue secretary Vineeta Rai leaves Parliament on Thursday. (PTI)

New Delhi, July 8: The Manmohan Singh government plans a major crackdown to recover Rs 17,000 crore in tax arrears from defaulters. While over Rs 14,000 crore is owed by way of income-tax and corporate tax, another Rs 3,000 crore is recoverable as customs and excise duties.

Finance minister P. Chidambaram said in his speech that he would take measures to check revenue leakage. The government plans to set up a task force to devise a multi-pronged strategy to recover this money.

Revenue secretary Vineeta Rai said Rs 17,000 crore of tax revenue was locked up in arrears that were clearly owed to the government and were not under dispute. At least Rs 8,000 crore of this would be collected in the next few months through strong administrative steps, she said.

Chidambaram has projected a 40.4 per cent increase in corporate tax collections in his budget over the corresponding figure for the previous year. While about 26 per cent is expected by way of normal annual growth in tax collections, it is evident the minister intends to pick up a neat chunk from the defaulters.

Both the customs and excise and income-tax departments are likely to be pulled up. The fact that there is no legal problem in collecting this money from the defaulters only goes to show that the administrative machinery has been lax.

Postings of senior officers caused a hue and cry in the income-tax department. Some officers have been holding on to plum posts in the metros and there was a move to shift them out. A revamp of the department is likely to be taken up now that the finance minister will have more time after completing his budget-making exercise. The customs and excise department has also come under a cloud from time to time with several officials caught by the CBI under the prevention of corruption act.

Chidambaram said in his speech that direct tax rates are now moderate and require only fine-tuning from time to time. Clearly, he expects better compliance as well.

The proportion of direct tax revenues to GDP has increased from 1.9 per cent in 1990-91 to 3.8 per cent in 2003-04. This implies that the income-tax department needs to be toned up further for undertaking the increased responsibility.

The proportion of indirect tax revenues in GDP has declined from 7.9 per cent in 1990-91 to 5.3 per cent in 2003-04. The finance minister said this is a rather sharp fall. “The weak spot is central excise. Excise revenues are stuck, rather stubbornly, at around 3.3 per cent of GDP. While reduction in excise duty rates partly accounts for this situation, the expansion of the manufacturing industry ought to have given us larger revenues,” he pointed out.

Excise assumes importance as the government has to scale down customs duties to the level of Asean countries on account of its WTO commitments.

Chidambaram said: “Through my policies on taxation, I wish to signal that we remain committed to increasing revenues from direct taxes and excise duties.”