Trade increases the wealth and glory of a country; but its real strength and stamina are to be looked for among the cultivators of the land. William Pitt
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They alone live who live by agriculture; all others lead a cringing, dependent life. Kural
It is very revealing how much companies and individuals do not pay as tax because they are legally entitled to claim the amounts as a tax deduction. The total of revenue foregone comes to over Rs 5 lakh crore i.e, revenue lost due to tax breaks, another name for tax subsidies. Budget numbers show that the total revenue forgone in 2009-10 was Rs 5,02,000 crore. T
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The fiscal deficit for 2009-10 is estimated to be Rs 4 lakh crore. That means what the government gave away by way of tax breaks in the fiscal year would have more than covered its projected excess expenditure this fiscal year. Another way of looking at the same thing is this: a complete scrapping of all tax breaks will bring down net market borrowing from Rs 4 lakh crore to not only to Zero but would have left a surplus of Rs 1 lakh crore which could have been invested in infra development like power & irrigation and in improving agricultural yields in Eastern India and improving yields of pulses in dry land farming regions..
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Revenue foregone in this budget in direct tax concessions to corporate tax payers is close to Rs. 80,000 crores. It was over Rs. 66,000 crore last year. And Rs. 62,000 crore the year before that. In all, Rs. 2,08,000 crores of direct freebies in 36 months.
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In direct tax freebies alone the corporate sector has had the equivalent of some 15 'farm loan waivers' since 1991. Then there's the indirect stuff. In this year's budget: Revenue foregone in excise duty — Rs. 1,70,765 crores. Customs duty — Rs.2,49,021 crores. Together with the Rs.80,000 crore in direct write-offs, the total nears Rs. 500,000 crores.
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Since excise and customs concessions account for the bulk of revenue forgone, corrective action should concentrate on that. Correcting for giveaways will also remove distortions. The previous FM said that every tax concession has a father and grandfather.
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Although many post-reform committees, from Chelliah to Kelkar, worked on removing tax breaks, the problem has worsened recently—the ratio of revenue loss to GDP has steadily gone up from 6.8% in 2005-06 to 8.75% in 2009-10.
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Interestingly, India Inc does better than the average income taxpayer in terms of exemptions on direct taxes. Revenue forgone in corporate tax has gone up from 9.5% of total collections in 2005-06 to 12.60% in 2000-10. For income tax, the ratio has decreased from 6.8% in 2006-07 to 6.5% in 2009-10. When average income taxpayers crib that they have it the unfair, they may have a point after all.
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| The total of revenue foregone comes to over Rs 5 lakh crore : |
- Corporate Income Tax Rs 79,554 crore
- Personal Income Tax Rs 40,929 crore
- Excise Duty Rs 170,765 crore
- Customs Duty Rs 249,021crore
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| The total of revenue foregone comes to over Rs 5 lakh crore. If all the deductions were ended, the Government not only would not have to borrow at all but would have left with a surplus of Rs 1 lakh Crore which coulf have been invested in power infra development which is the crying need of the day. |
Note : Farmers in USA, EU and Japan get half of their income from subsidies |
The two-member committee on resource mobilisation formed by the Punjab government, on Tuesday ruled out withdrawal of subsidies
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On the crucial issue of subsidies on agricultural inputs like free power and irrigation, the report categorically states, “Subsidies on agricultural inputs like free power and water will be rationalised and not withdrawn.” It quotes a report by Economist, London, to reinforce its argument in favour of subsidies. “52% of American farmer’s income, 46% in the European Union and 56% of the Japanese farmer’s income comes from government subsidies. In contrast, Punjab farmers get only 5% of their income in subsidies.”
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Tax arrears have risen to over Rs one lakh crore
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| They account for around a sixth of the total tax collections in a year. What is distressing is that, of the Rs 103,808 crore of tax arrears as on March 31, 2008, nearly 40 per cent is categorised as ‘amounts not under dispute’. Surely, this suggests sluggish tax collection machinery; the large amounts under dispute (Rs 64,000 crore, or over 1 per cent of GDP) also suggest that there is plenty of scope for speedy dispute settlement and revenue realization. KRSR//120310 |
