Finance Ministry draws roadmap to zero-revenue deficit by 2007-08

The report says the strategies for fiscal consolidation comprise enlarging the tax base by rationalising exemptions and expanding service tax, process engineering of the tax system, focussing on a simple and rational tax system, reducing transaction costs and improving tax-payer services, reducing subsidies with better targeting and downsizing of the government.

The tax base has also undergone a paradigm shift over the last decade. ‘‘Income tax collection from individuals and corporations contributed 35.7 per cent of total value in 2001 as against 18.9 per cent in 1990,’’ the report says.

‘‘These reforms anchor the fiscal consolidation envisaged in the Fiscal Responsibility Act, and the commitments of State governments which require elimination of the revenue deficit from 5.83 per cent in 2002-03 to zero by 2007-08,’’ the report adds.

The Fiscal Responsibility Act has sought to put a legislative mandate on the government to eliminate revenue deficit by 2007-08. The revenue deficit is the difference between revenue receipts and revenue expenditures.