Faced with one of the worst financial crisis the State has seen since its formation 58 years ago, Kerala’s Congress-led UDF Government on Wednesday decided to hike taxes in several key sectors and to steeply increase almost all Government fees.
As per the decision taken by the State Cabinet in its meeting in Thiruvananthapuram on Wednesday, water, liquor, tobacco products, land registration, Government services, etc will become massively costlier though Chief Minister Oommen Chandy claimed that the Government had taken particular care to spare the common man adverse effects of the hikes.
As per the Cabinet decision, the system of supplying water up to 10,000 litres to BPl families free of cost will continue. Also, there will be no hike in the price of water for families consuming up to 10,000 litres. But the water tariff will go up by 50 per cent to 60 per cent for those using more than 10,000 litres. The plan is to raise additional revenue of Rs205 crore from this.
The Government has imposed a 20-per cent hike in the tax on India-made foreign liquor (IMFl – hard liquor). The tax on IMFl will thus go up to 135 per cent from the present 115. Apart from this, a five-per cent cess also will be imposed on liquor for the rehabilitation of the employees of bars who stand to lose jobs due to the booze ban.
The hike in the liquor taxes is expected to add Rs1,130 crore to the Treasury. Tax on beer and wine will be hiked from 50 percent to 70 percent, bringing in Rs100 additionally to the Exchequer. Tax on cigarettes would go up from the present 22 per cent to 30 per cent and three percent of this would be earmarked for treatment of cancer patients, Chandy said.
At present there is no proposal to hike the stamp duty for land registration but the upper ceiling of Rs1,000 for a class of registrations has been removed. Stamp duty will have to be paid at a rate of one per cent of the land price for all such registrations. A Cabinet sub-committee has been entrusted with the task of reviewing the land fair value system existing in the State.
The hike in taxes on cigarettes is expected to add Rs264 crore to the Exchequer.The Government plans to raise an additional Rs78 crore by almost doubling the land taxes in panchayats, municipalities and corporations. The additional revenue expected from hiking Government fees is Rs369 crore.
As per this, fess between Rs10 and Rs1,000 will go up by 50 percent. The hike proposed for fees between Rs1,000 and Rs10,000 is 25 per cent and for those above Rs10,000 it will be 15 per cent. The Education sector would be exempted from the fees hike, the Chief Minister said.
The Government has also conceived measures to intensify the collection of tax arrears. Stating that an action plan had been devised to ensure proper functioning of the Treasury, Chief Minister Chandy said that all Ministers would forego 20 percent of their salaries till March next. Controls will be imposed on foreign tours for which Government spends money.
Critics say that the Government has decided to hike taxes on the ground that the total liquor ban will incur an annual loss of over Rs 7,000 crore to the Exchequer but the fact is that the loss through booze ban will not start to affect the State’s finances in this fiscal. The total booze ban is to be implemented over the next ten years only, they point out.
The CPI(M)-led Opposition lDF held Chief Minister Chandy singularly responsible for the current financial crisis in the State. CPI(M) MlA and former Finance Minister TM Thomas Isaac, himself a reputed economist, said that it was unjust to impose the burden on the people and that the left would launch intense agitations against the tax and fees hike.