Statement of Revenue Foregone
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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).
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.
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).
