Tax exemptions cost the Government Rs 1,38,921 crore in revenues in 2010-11, says a CAG report on direct taxes. Of this, the lion's share went to the corporate sector.
In the last five years, the amount of revenue foregone has increased 111.8 per cent, the Comptroller and Auditor General's (CAG) said in its report tabled in the Lok Sabha on Tuesday.
The Government auditor said that corporate sector accounted for 63.5 per cent (Rs 88,263 crore) of the revenue forgone of 2010-11. “The revenue foregone on account of tax exemptions in respect of corporate tax payers increased by 76.3 per cent as compared to 226.6 per cent in respect of non-corporate tax payers during 2006-07 to 2010-11,” it said. In 2006-07, the Government provided tax sops worth Rs 65,587 crore.
Reporting discrepancy
The CAG report said there were 7.2 lakh working companies in the country, according to the data with the Registrar of Companies, but there were only 3.8 lakh corporate assesses, according to the Income-Tax Department. “The board (Central Board of Direct Taxes) needs to reconcile the discrepancy for accurate assessment of the filing gap,” the report suggested.
The auditor pointed out that the widening of tax base in the country was “very limited.” It observed in the report that the assessee base grew over the last five years from 313 lakh taxpayers in 2006-07 to 335.8 lakh tax payers in 2010-11. “The total direct tax collection has increased by 94.2 per cent during the same period. The increase in tax collection was around 13 times as compared to the increase in taxpayers' base. This indicates a very limited widening of tax base over the years,” the report said.
The CAG also said that voluntary compliance by assessees at the pre-assessment stage accounted for 81.4 per cent of the gross collections in 2010-11. Maharashtra, Karnataka and Delhi contributed 61.6 per cent of the total direct tax collected.
Interest payments
In another report on Union Government Finances and Accounts, the CAG said a the Central Board of Direct Taxes incurred a total expenditure of Rs 37,365 crore on interest payments over the last five years without obtaining approval of Parliament through necessary appropriations.