WHAT IS TAX FOREGONE In 2013-14, the central government lost potential tax revenue worth a staggering Rs 5.73 lakh crore due to various exemptions, concessions and rebates given to sections of taxpayers. This is an increase of about Rs 6,689 crore compared to the previous year. Information regarding revenue foregone was presented to Parliament as part of the Budget. Known officially as revenue foregone or tax preferences, this amount can be understood as a subsidy payment to preferred taxpayers according to the document. Such implicit subsidy payments are also referred to as ‘tax expenditures’. Tax expenditures can also be termed as revenue foregone. Tax expenditure or revenue foregone statement was laid before Parliament for the first time during Budget 2006-07 by way of Annex-12 of the Receipts Budget 2006-07 .Tax exemptions fall into four categories — those given to corporate and personal income tax payers, and those given to excise and customs duty payers. These figures do not include export promotion related concessions, which amount to an additional Rs 45,786 crore. A comparison of the revenue foregone data over the past seven years shows it has zoomed up by over 138% from about Rs 2.4 lakh crore in 2006-07. Direct tax concessions worth Rs 76,116 crore were given to corporate bodies. Interestingly, data collected by the finance ministry from tax returns of corporate bodies showed the tax rate effectively paid by them was just 22.44% whereas the statutory rate is 32.445%. Analysis of returns filed by 6,18,806 companies for 2012-13 showed that some of the biggest companies were paying taxes at rates even lower than the average. Companies with over Rs 500 crore profit before-tax numbered 272 and they had an effective tax rate of 20.97%. At the other end of the scale, 2, 84,697 companies showed no profit and hence did not pay any tax. Companies with up to Rs 1 crore profit-before-tax paid tax at an effective rate of 26.73%.
Posted on: Tue, 15 Jul 2014 17:30:38 +0000
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