Tuesday, July 7, 2009

[Investors Please Listen] Govt. lost $87 Billion via tax exemption last fiscal

In 2008-09, the government lost $87 billion (Rs 418,095 crore) of potential revenue due to the various exemptions and rebates given to individuals, corporate and non-corporate firms. This year, the finance minister has refused to reduce the tax rates for the corporate sector citing the loss of revenue because of such schemes.



Although there was an increase of 2.4 percent in the total tax collection in 2008-09 as compared to 2007-08, the loss of revenue also saw an increase of 46.7 percent. This amounts to 69 percent of the aggregate tax collected in 2008-09. The loss is excluding export related exemptions and exemptions given to neutralize customs duties of importing countries. If included, the total revenue foregone will amount to more than two-third of the total collection.

The lost revenue also called tax preferences reflects the policies of the government. The biggest contributor to this loss has been the different exemptions given to customs duty which came to around Rs 2.3 lakh crore. Excise duty rebates led to Rs 1.3 lakh crore as loss. Exemptions in personal income tax and corporate tax meant a loss of Rs 39600 crore and Rs 6,900 crore respectively.
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