Karnataka should explore possibilities to cut government expenditure significantly, with state finances in shambles following the COVID-19 induced lockdown, said a former bureaucrat. Former Chief Secretary A Ravindra said the government may now also consider increasing sales tax on petrol and diesel to raise resources.
Asked if the government would be forced to cut salaries of its employees in view of the resource crunch it is facing, Ravindra said if there is a 10% slash for three months, it would be significant because a considerable part of the state's revenue only goes for salary. But the government would have to persuade the employees to take a pay cut in view of the crisis, communicate properly and the action should not be seen as imposing straightway.
Raising resources is not very easy at this stage because it should not pinch people too much, especially essential services, he told PTI. The government, Ravindra said, has so many departments, including some with very little work, adding, that the related ones can be combined to cut staff and costs.
"Cutting expenditure also means raising resources,” he said, but he acknowledged that the state government has very little scope to raise revenues. Earlier, commercial taxes could have been leveraged in different forms, but with the GST regime in place, that leeway has gone, he said. The Karnataka government recently announced a 11% excise duty hike on liquor on top of the 6% announced in the 2020-21 budget.
Ravindra felt that the government can still hike tax on purchase of luxury cars.
According to him, stamp duty on property registration may not be hiked as there is a view that if the charge very high, it would lead to tax evasion, and it is better to keep it reasonable or low. On the government's proposal to regularise unauthorised constructions by imposing penalty and auction residential sites held by the Bangalore Development Authority, Ravindra said doing so at one go may not be very practical. He wondered if there would be enough buyers for such high-priced sites in the immediate aftermath of the COVID-19 pandemic. Regularisation (of unauthorised constructions) is a difficult process and implementation of those rules (to carry out such a task) is not an easy thing, he said. He noted that while regularising land encroached by poorer people, one can't levy a high charge. In the matter of regularising big buildings, there could be legal issues and people may go to court, delaying the entire exercise. As of now, I don't see much scope for getting a lot of revenues (from regularisation of unauthorised properties and auction of BDA sites), he said.