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Suresh Krishnamurthy

Hard fact The biggest source of revenue foregone for the Government however remained customs duty.

In keeping with the promise to make Budget-making transparent, the Finance Minister placed before Parliament data relating to tax revenues not realised and tax revenues foregone because of various exemptions that are in force.

For the year ended March 2005, exchequer was owed taxes, that were not in dispute, of Rs 42,917 crore payable during that year. Taxes relating to earlier years worked out to Rs 2,843 crore. In addition, taxes in dispute totalled to Rs 65,300 crore.

If the amount of taxes that the Government tried to recover, but did not, crossed Rs 1,11,000 crore, the size of the revenue willingly foregone was even higher. Value of direct tax benefits provided to the corporate sector worked out to Rs 57,900 crore. Provisions in the Income-tax Act relating to depreciation were the biggest source of incentive. Similarly, the value of giveaways to individuals in the form of tax rebates worked out to Rs 11,695 crore.

The biggest source of revenue foregone for the Government however remained customs duty. Even excluding export credit related incentives, value of customs duty related incentives worked out to Rs 57,100 crore. Inclusive of export benefits, customs duty foregone worked out to a whopping Rs 92,600 crore. Duty foregone exceeded Rs 10,000 crore for industries such as minerals, precious stones and electrical machinery.

The statements also illustrate that tax incidence on corporate profits have remained at slightly less than 20 per cent. In particular, effective tax rate on companies earning profits before tax of Rs 500 crore were only 16 per cent. Nearly 60 per cent of the companies paid an effective tax rate of less than 20 per cent.

More Stories on : Taxation | Budget

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