The recent report of the comptroller and auditor general on West Bengalís finances for the year 2000-01 has brought to light several flaws in the collection and levy of sales tax, excise duty and land revenue. The report estimates the consequent revenue loss at Rs 3,502.45 crore, and suggests that the actual figures might be higher.
The average cost of revenue collection in the state as a percentage of the total revenues is 5.45 per cent as against the national average of 3.26 per cent. Less than 1 per cent of this goes into infrastructure. The result is disconnected telephones lines, fewer and irregularly functioning computers, and offices in disrepair. The state governmentís Rs 1,000 crore monthly wage bill, the result of the fourth pay commission and an unplanned recruitment policy, means it has little money for infrastructure. For example, the government abolished octroi duty on April 1, 1995, but the 1,100 employees in the octroi department have not been deployed elsewhere and continue to get paid for only signing the attendance register.
The lack of prudence is most visible in revenue planning. Between 1994-95 and 1999-2000, Bengalís state domestic product grew at the rate of 7.04 per cent per annum. While agriculture grew at 6.11 per cent and services grew at 9 per cent, industrial growth was only 4.6 per cent. But the government refused to tap the agricultural and service sectors for revenue. Thus while agricultural income tax brought in only Rs 2.93 crore in 200-01, the service sector remained outside the tax net.
West Bengal has a shockingly poor database. Vital economic data are either unavailable or remain unprocessed. The mode of collecting data is also all wrong. Inefficient officers are notorious for filling up data sheets with partially concocted figures or sending them back blank. Naturally, budget estimates based on such faulty data are way off the mark.
Take the sales tax. Between 1999-2000 and 2001-02, the budget estimated the average growth rate would be 22-23 per cent per annum. But industrial growth during this period was only 4.6 per cent and hence actual collections fell short by 12-13 per cent, although the net growth was 9-10 per cent per annum. This is also the case with excise duty, profession tax, entertainment tax, luxury tax, coal cess, and so on.
The CAG blames faulty assessment norms for the colossal leakage of sales tax, profession tax, excise duty. Of course, in no country are revenue laws proof against evasion. But laws need to be changed to keep evasions to the minimum. In West Bengal, however, revenue laws have become increasingly complicated and impractical. They seem to have lost their balance somewhere between trying to benefit one sector and tightening the screws on another.
Not any holier
But then even the audit department is not any different from the inefficient and corrupt government machinery. Audit officers are a floating group engaged in scrutinizing different revenue wings at different times. This makes it very difficult for them to acquire a thorough knowledge of the voluminous and fast-changing laws pertaining to the various taxes. At best they can only glean hidden flaws in assessments. Most bureaucrats look upon audit scrutinies with disdain. Hence many of the queries remain unanswered for long.
Naturally, piling up of such unassessed cases means larger tax evasions. Take sales tax again. Out of approximately 2,450 cases, amounting to around Rs 6,500 crore, as many as 1,150 queries, accounting for Rs 4,000 crore, may be virtually written off as irrecoverable because the assessees are either dead or non-existent. Another 1,100 cases are sub judice as the assessees have contested the revised assessments, and only 150 queries, amounting to Rs 1.22 crore have yielded revenues.
Thus, if on the one hand, we need a complete overhauling of our revenue policies and collection system, on the other, we also need a thorough debate on the functioning of audit departments.