Vivan Fernandes, New Delhi: Pay your taxes - the message from P Chibambaram and his team seems to have worked.

Direct taxes – a combination of personal income tax and corporate taxes –have touched Rs 2 lakh crore so far and is expected to rise by another crore by April – a 42 per cent jump from what the government got last year.

So will there be a tax rate cut? The Finance Minister did not answer that question directly in an off-camera meeting with journalists on Tuesday. He repeated his statement that if compliance improves, there is a case for moderation in taxes.

Simply put that could mean a cut in tax rates or creating more tax slabs that could help some sections of tax payers.

Chidambaram says the tax-payer friendly measures also helped and more people got tax refunds this year.

There were 35 lakh refunds till January compared to 27 lakh a year ago and over 13 lakh returns were filed online, a three-fold increase from last year. To change the image of the income tax department, an HRD directorate is also on the cards.

There is clear evidence that voluntary compliance has improved and Chidambaram has acknowledged as much.

Whether the moderation in taxes will be achieved through a cut in rates or an increase in slabs is an issue that will have to be settled in the Union Budget.