Panel pulls up Centre on tax regime

The Parliamentary Standing Committee of Finance while taking stock of Direct Taxes collection during 2009-10 noted with concern that revenue loss to the exchequer by way of tax exemptions and deduction amounted to a mind-boggling amount of more than Rs 1,50,000 crore.  The Revenue Department has submitted before the Committee that the revenue foregone in respect of Corporate Income Tax during 2009-10 increased to Rs 79,554 crore while the same for personal Income Tax was Rs 40,929 crore.

Revenue foregone on account of Direct Tax incentives and deduction given to export promotion scheme amounted to a whopping Rs 30,000 crore and more during 2009-10.     
“Facts are so evident that it requires no over-stating that tax concessions and exemptions provided in general have been huge and phenomenal, amounting to more than half of the total direct tax collections in 2009-10,” the Committee headed by the senior BJP leader Murli Manohar Joshi said.

If the aggregate exemptions in both Direct and Indirect taxes is taken into account, it works out to a massive Rs 5,02,299 crore in 2009-10, which is almost 80 per cent of the total revenue collections.“Such exemptions have been increasing and leaving an adverse impact upon revenue buoyancy,” the Committee cautioned.  Against this backdrop the Committee asked the Finance Ministry to review the present regime of tax  exemptions and deductions while formulating the proposed Direct Tax Code (DTC). It suggested that keeping in mind the fact that most of these have exemptions have outlived their purpose, it would be just and equitous to put in place a Policy of Exemptions, which would substantially reduce the percentage of tax foregone but at the same time encourage household savings, foster social security and is generally favourable to small tax payers.
“The revenue thus retrieved may be utilised to fund government’s developmental programmes particularly in agricultural sector,” the Committee recommended.