The GST has not really stripped the finance minister of his control over tax revenues. At least 45 percent of taxes, mostly revenue from the sale of petroleum products and beverages, are still in the minister's control. The only problem is he cannot tinker even with the taxes under his command as they are already pegged very high. However, he can take very strong measures on the real estate front. It is high time the fair value is increased. The present value that was fixed in 2012 was based on the market value of land in 2006. Once the fair value is updated to reflect current prices, land tax and stamp duty and registration fee will go up.
The minister should also demonstrate the political will to increase non-tax revenues. User charges have to be upped for medical, engineering and higher secondary education. At the moment, the fees are abysmally low. Take for instance medical education. The Supreme Court has fixed Rs 11 lakh as the money required to educate a medical student. A government college student pays just Rs 25,000 annually. This can at least be doubled. Another example would be diagnostic fees, which in government hospitals is just 10-37 percent of what is charged in private labs. This, too, can be hiked by at least 10 percent. Student concessions, also, should be done away with. Land leases, untouched for decades, have to be increased. Undisputed tax arrears of Rs 2880 crore should be recouped urgently. Of the over 100 non-tax revenue sources in all the state departments, at least 36 can be increased.
(MARY GEORGE is Economist and former member of the State Expenditure Review Committee)
User fee hike in edu sector can help state
The finance minister has to think of raising user fees in the medical and education sector. These have remained almost stagnant since 2013. But such increases will not be enough to get the state out of its present crisis. This crisis is grave, and persistent, and it needs structural adjustment. Minor mobilisations will not help to bridge the deficits that have been growing with every year. The basic reason for the acute fiscal crisis is the revision of salaries once in five years, and also the implementation of two DA revisions a year.
The salary and pension bill was Rs 7300 crore in 2017-18, last fiscal it was Rs 6300 crore. A normal annual increase has to be just Rs 3000 crore. Defer DA revision till the state gets over the crisis. If the government can stop paying KSRTC pensioners, why can't the DA revisions be postponed? After the major restructure is done, then the finance minister can turn his sights to non-tax revenues. Lease and rent rates should be increased. Government quarters, for instance, are given out for less than 10 percent of its market value.
Inter-departmental accounts have to be streamlined. Now, we have a situation where the KSEB and others are refusing to pay the KWA and vice versa, or various departments are neglecting to pay the Forest Department for the timber they have purchased. Extravagance is mostly seen in private aided educational institutions. Surplus staff, and new batches are bleeding the state of its precious resources. This sort of financial haemorrhaging has to be stanched.
(B.A. PRAKASH is Economist and former chairman of the State Expenditure Review Committee)
It’s time lease rent on govt land increased
Take over the property tax through a tax rental arrangements with local governments and entrust its administration to Goods and Services Tax Department. There is huge potential for additional revenue mobilization even after compensating the local governments. Government services in health and education can be targeted to the really deserving sections through Direct Benefit Transfer and for others the rates can be raised comparable to private sector providers.
The lease rent on government land and royalty on mines can be increased.
The second and /or subsequent motor vehicle registered in the name of a person or in a specific address can be taxed at a higher rate than the normal rate. Such a system exists in Andhra Pradesh and Karnataka. Government land in prime locations can be given to private property developers on long term lease (50 to 75 years) for construction of commercial complexes where a specific portion will have to be set apart for government purposes free of rent. Bring in enabling amendments in the Act and Rules governing land revenue which will permit payment of land revenue for 15 years.
(JOSE SEBASTIAN Tax expert, and associate professor of Gulati Institute of Finance and Taxation)
‘Spend in tune with revenues’
Like all State finance ministers, Dr Isaac has also only the sales tax on petroleum and liquor, and other minor taxes to tinker with. Kerala's petroleum taxes are charged on an ad valorem basis, and will rise and fall as the centre's moves up and down. A suo motu hike by the state seems unlikely. Liquor being an inelastic tax, no one complains. But even here there is not much scope for increase.
Land taxes but can be scientifically restructured, it has to be linked with income. Nominal land tax does not cover even the administrative cost.
Profession Tax is fixed at Rs 2500, as per the constitutional amendment in 1988. Periodic revision of the tax is called for. The States together can make a request for a constitutional amendment for a hike to Rs 5000/- Raising non-tax revenue is tricky. However much you raise it, it is not going to cover the cost of services or bridge the revenue deficit. It is not a politically feasible option for any government. It can trigger more protests, than revenue growth, contrary to persistent view of certain experts.
Land's fair value has to be periodically revised, perhaps every year based on market realities. Realistic spending, which does not hurt the have-nots and the poor, has to be the aim. Expenditure has to be in tune with the revenues that can be raised by the State and through Central devolution. Borrow sustainably to create physical and human capital. In other words, never bite more that what can be chewed. A trade off is called for: whether to increase social welfare pensions or add ten new plus-two batches?
(R. MOHAN Former IRS official, and member of State Public Expenditure Committee)
‘Minister should focus on expenditure control’
Dr Thomas Isaac's focus should be more on expenditure control than revenue mobilisation. Kerala economy had been largely driven by NRI remittance money. This has now fallen, and the state cannot expect more from this source in future. During the last 20 years, the rate of growth of the state economy was higher than the national economy. Going forward, it will lag behind. The phase of high growth is over. If the deficit has to be bridged, the major item of expenditure - salaries and pension - has to be cut. In 2009-10, the total salary and pension bill was Rs 14,500 crore. This year, it has swollen to more than Rs 50,000 crore, an unsustainable rise of 300 percent in eight years. For certain sections, their pension has gone up by six times in five years. The practice of implementing pay revision every five years should stop.
Band-aid solutions will not work, reconstructive surgery is the need of the hour. The practice of implementing pay revision every five years should stop. PSUs that keep on making losses should be privatised. Commissions to accommodate sulking politicians should be done away with. As for revenues, there is not much room to manoeuvre. A substantial increase in user fees across the board is long overdue. It is high time the state government showed the spunk to bit the bullet. The state's avenues to raise revenues, too, are when compared to other states are relatively lesser. Agriculture contributes just about 12 percent. Manufacturing makes up 25 percent, but a good part of this made up by the construction sector. But the economy is skewed in favour of the services sector, which gobble up 63 percent of the economic activities.
(V.K. VIJAYAKUMAR Chief investment strategist, Geojit Financial Services)
