A staggering $866 million. That was the tax revenue that Government missed collecting in 2009 because business and consumers did not buy genuine software.
Business Software Alliance – a software advocacy body with members such as Apple, Adobe, Autodesk and Corel – has conducted a study which reveals that only a third of the overall PC software revenues are captured and the rest are lost to software piracy.
The notional tax loss figure primarily takes into account evasion of indirect taxes (VAT, CVD and Octroi) when consumers and enterprises do not opt for genuine software.
The study also computed the loss of direct tax in the entire value chain.
It argued that, but for piracy, distributors and resellers would have earned more and, therefore, would have paid higher taxes.
A 65 per cent piracy (of packaged software labels such as Microsoft and Adobe) means that more than six out of 10 PC software programs installed in the Indian market in 2009, were not paid for. In 2010, the piracy levels cooled-off but only by one percentage point to 64 per cent.
“Countries like Mexico, Italy and Germany classify usage of unlicensed and pirated software by companies as a form of tax evasion. If similar steps are taken in India, it will, in turn, trigger new audit rules. For instance, it should be made mandatory for companies to declare genuine and licensed software as part of their internal and external audits,” Mr Keshav S Dhakad, Chair - BSA India Committee, said.
BSA has argued that if PC software piracy was curtailed by five per cent in 2011, the incremental potential industry revenue or GDP contribution will be to the extent of about $790 million, tax revenue ($95 million) and new high-skilled jobs (26,108).
On the tax losses computed for 2009, the study by BSA found that indirect tax receipts would have gained $553 million from software (media and paper licences), and services-related business transactions and direct tax receipts another $313 million.