Statement of Revenue Foregone under the
Central Tax System for Financial Years 2005-06 and 2006-07:
Every
tax system aims to raise revenues to provide funds for
Government expenditure. The
tax bases and
tax rates determine the amount of revenue raised to a large extent.
The level and
distribution of tax are affected by a range of factors:
special tax rates, exemptions, deductions, rebates, deferrals, and credits. These measures are sometimes called
tax preferences. They usually have an impact on
government revenue (i.e. they have a cost) and also reflect the policy choices of the government.
Tax preferences may be looked at as
subsidy payments to
preferred taxpayers. Such inexplicit payments are referred to as
tax expenditure and it is often argued that they should appear as expenditure items in the
fiscal budget.
A
Statement of Revenue Foregone or
tax expenditure was placed before
Parliament for the first time during the 2006-07 budget, by way of Annexure-12 of the
Receipts Budget of 2006-07. It was well accepted by all quarters and it gave rise to constructive debates on the entire ambit of issues concerning
fiscal policy. It also strengthened the Government's intention of bringing about transparency in matters of
tax policy and
tax expenditure.
Attempts have been made to list the revenue impact of
tax incentives or
tax subsidies that are a part of the tax system of the Central Government. The
revenue foregone on account of such tax incentives has been estimated only in respect of major items of
tax preferences over which there is no ambiguity. An attempt has been made to estimate the revenue loss during financial year 2006-07 on the basis of the
Statement of Revenue Foregone figures of 2005-06, or actual figures for 2006-07 (April- September).
