The revenue foregone on both direct and indirect taxes for 2008-09 is estimated at Rs 4,18,095 (68.95 per cent of aggregate tax collection), up almost 45 per cent per cent from Rs 2,85,052 crore (48.16 per cent of aggregate tax collection) in 2007-08.
"There have been demands by the corporate sector for reduction in tax rates. The Income Tax Act is riddled with a plethora of tax exemptions which substantially erode the tax base. The growth in the direct tax revenue foregone is relatively higher than the growth in the direct tax revenues.
Accordingly, I do not propose to make any change in the Corporate Tax rates," Mukherjee said.
Analysis of income tax returns filed by 4,09,573 companies for 2007-08 showed that the effective tax rate of 22.24 per cent was way below the statutory rate of 33.99 per cent. Manufacturing sector had a higher incidence of 22.46 per cent, while services companies had a lower incidence of 22 per cent. (Public sector incidence was 25.69 per cent and private sector 21.28 per cent).
The revenue foregone on account of various deductions on corporation tax stood at Rs 68,914 crore (11.36 per cent of total corporation tax collection) for 2008-09, up from Rs 62,199 crore in 2007-08 (10.5 per cent).
Revenue foregone in the case of personal income tax stood at Rs 39,553 crore in 2008-09 (6.53 per cent), up from Rs 33,278 crore (6.43 per cent) in 2007-08.
In case of indirect taxes the trend shows a significant increase for the financial year 2008-09 due to reduction in customs and excise duties. The government had cut excise duty in two tranches last year to stimulate the economy after it experienced an economic slowdown.
The excise revenue foregone in 2008-09 is estimated at 1,28,293 crore (21.16 per cent), up from Rs 87,648 crore (14.77 per cent) in the previous financial year.
The revenue foregone in customs is estimated at Rs 2,25,752 crore (37.23 per cent) in 2008-09 over 1,53,593 crore (25.95 per cent) in 2007-08.