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Corporate tax cuts: Revenue lost could have funded important welfare projects

Amount could have doubled the budget for 20 crucial ministries and departments

Bharat Dogra 18 Aug 2022

Corporate tax
Image: PTI

In 2019, the Government of India announced a reduction of corporate tax rate from 30 per cent to 22 per cent, along with a further reduction to 15 per cent for new corporations. The Parliamentary Committee on Estimates has recently stated that this has led to a revenue loss of Rs. 1.84 lakh crore to the public exchequer in the two years: 2019-20 and 2020-21.

This raises the question regarding how much we have lost in terms of funds that could have been utilized for priority tasks. What we should not forget is that many important schemes and programs have been facing severe resource constraints. Inadequate allocations have been made for important welfare and development programs, and then further cuts have been made, citing resource constraints. Hence questions are bound to be asked regarding the additional funds that could have become available for priority needs if this loss of revenue amounting to Rs. 1.84 lakh crore had not taken place.

Here we present calculations to show that an amount of Rs. 1.84 lakh crore would have been adequate to exactly double the allocations for as many 20 departments and ministries which are very important for welfare and development.

In the table below we show the combined actual expenditure for 2019-20 plus 2020-21 for 20 ministries and departments. By adding these we get a figure of Rs. 1.84 lakh crore. In other words, if the loss to revenue caused by corporate tax cut had not taken place, then there was a potential of exactly doubling the budget/expenditure of all these 20 departments and ministries.

The expenditure data has been taken from the expenditure profile for these two years provided by the Budget Division of the Ministry of Finance, and then adding the figures for the two years.

Combined Actual Expenditure of 20 Ministries and Departments for 2019-20 and 2020-21

1. Ministry of Environment, Forests and Climate Change – Rs. 4,486 crores

2. Ministry of Labor and Employment—Rs. 23,003 crores

3. Ministry of Minority Affairs—Rs. 8,351 crores

4. Department of Social Justice and Empowerment—Rs. 16,771 crores

5. Department of Empowerment of Persons with Disabilities—Rs. 1,864 crores

6. Ministry of Tribal Affairs—Rs. 12,821 crores

7. Ministry of Women and Child Development—Rs. 42,395 crores

8. Ministry of Youth Affairs and Sports—Rs. 4,384 crores

9. Department of Science and Technology—Rs. 10,300 crores

10. Department of Health Research—Rs. 4,984 crores

11. Ministry of Ayush—Rs. 3,910 crores

12. Department of Pharmaceuticals—Rs. 1,009 crores

13. Ministry of Culture—Rs. 4,629 crores

14. Ministry of Development of North-Eastern Region—Rs. 4,510 crores

15. Department of Animal Husbandry and Dairying—Rs. 5,175 crores

16. Department of Water Resources, River Development and Ganga Rejuvenation—Rs. 14,650 crores

17. Ministry of Micro, Small and Medium Enterprises—Rs. 12,152 crores

18. Ministry of New and Renewable Energy—Rs. 6,051 crores

19. Ministry of Panchayati Raj—Rs. 1,184 crores

20. Ministry of Planning-Rs. 1,316 crores

Total—Rs. 1.83,945 crore (approximately Rs. 1.84 lakh crore).

As can be easily seen, several very important ministries and departments are covered in the table above, including the Ministry of Women and Child Development, Ministry of Labor and Employment, Ministry of Tribal Affairs, Ministry of Minority Affairs, Department of Social Justice and Empowerment and Department of Science and Technology.

Several schemes and programs of these various ministries and departments have been suffering due to lack of availability of adequate resources and have been in news due to this. Imagine what a relief it would be if the resources available could be doubled, as would have been possible if the loss on account of arbitrary and unwarranted cut of corporate tax was avoided.

Here it may be recalled that this cut in corporate tax, announced in September 2019 just before the Howdy Modi event organised in the USA, had attracted a lot of criticism at that time as well.

The lesson for future is that in situations of severe resource constraints revenue opportunities should not be squandered just to appease some powerful interests. The costs for people can be very heavy, as was soon seen during the pandemic times which followed this tax cut.

*Views expressed are the author’s own. The writer is Honorary Convener, Campaign to Save Earth Now.

Other articles by Bharat Dogra:

Himachal Pradesh: Apple growers continue protest over adverse impact of Big Business

80th Anniversary of Quit India Movement

Why the Struggle of Dhinkia Deserves Wide Support

Corporate tax cuts: Revenue lost could have funded important welfare projects

Amount could have doubled the budget for 20 crucial ministries and departments

Corporate tax
Image: PTI

In 2019, the Government of India announced a reduction of corporate tax rate from 30 per cent to 22 per cent, along with a further reduction to 15 per cent for new corporations. The Parliamentary Committee on Estimates has recently stated that this has led to a revenue loss of Rs. 1.84 lakh crore to the public exchequer in the two years: 2019-20 and 2020-21.

This raises the question regarding how much we have lost in terms of funds that could have been utilized for priority tasks. What we should not forget is that many important schemes and programs have been facing severe resource constraints. Inadequate allocations have been made for important welfare and development programs, and then further cuts have been made, citing resource constraints. Hence questions are bound to be asked regarding the additional funds that could have become available for priority needs if this loss of revenue amounting to Rs. 1.84 lakh crore had not taken place.

Here we present calculations to show that an amount of Rs. 1.84 lakh crore would have been adequate to exactly double the allocations for as many 20 departments and ministries which are very important for welfare and development.

In the table below we show the combined actual expenditure for 2019-20 plus 2020-21 for 20 ministries and departments. By adding these we get a figure of Rs. 1.84 lakh crore. In other words, if the loss to revenue caused by corporate tax cut had not taken place, then there was a potential of exactly doubling the budget/expenditure of all these 20 departments and ministries.

The expenditure data has been taken from the expenditure profile for these two years provided by the Budget Division of the Ministry of Finance, and then adding the figures for the two years.

Combined Actual Expenditure of 20 Ministries and Departments for 2019-20 and 2020-21

1. Ministry of Environment, Forests and Climate Change – Rs. 4,486 crores

2. Ministry of Labor and Employment—Rs. 23,003 crores

3. Ministry of Minority Affairs—Rs. 8,351 crores

4. Department of Social Justice and Empowerment—Rs. 16,771 crores

5. Department of Empowerment of Persons with Disabilities—Rs. 1,864 crores

6. Ministry of Tribal Affairs—Rs. 12,821 crores

7. Ministry of Women and Child Development—Rs. 42,395 crores

8. Ministry of Youth Affairs and Sports—Rs. 4,384 crores

9. Department of Science and Technology—Rs. 10,300 crores

10. Department of Health Research—Rs. 4,984 crores

11. Ministry of Ayush—Rs. 3,910 crores

12. Department of Pharmaceuticals—Rs. 1,009 crores

13. Ministry of Culture—Rs. 4,629 crores

14. Ministry of Development of North-Eastern Region—Rs. 4,510 crores

15. Department of Animal Husbandry and Dairying—Rs. 5,175 crores

16. Department of Water Resources, River Development and Ganga Rejuvenation—Rs. 14,650 crores

17. Ministry of Micro, Small and Medium Enterprises—Rs. 12,152 crores

18. Ministry of New and Renewable Energy—Rs. 6,051 crores

19. Ministry of Panchayati Raj—Rs. 1,184 crores

20. Ministry of Planning-Rs. 1,316 crores

Total—Rs. 1.83,945 crore (approximately Rs. 1.84 lakh crore).

As can be easily seen, several very important ministries and departments are covered in the table above, including the Ministry of Women and Child Development, Ministry of Labor and Employment, Ministry of Tribal Affairs, Ministry of Minority Affairs, Department of Social Justice and Empowerment and Department of Science and Technology.

Several schemes and programs of these various ministries and departments have been suffering due to lack of availability of adequate resources and have been in news due to this. Imagine what a relief it would be if the resources available could be doubled, as would have been possible if the loss on account of arbitrary and unwarranted cut of corporate tax was avoided.

Here it may be recalled that this cut in corporate tax, announced in September 2019 just before the Howdy Modi event organised in the USA, had attracted a lot of criticism at that time as well.

The lesson for future is that in situations of severe resource constraints revenue opportunities should not be squandered just to appease some powerful interests. The costs for people can be very heavy, as was soon seen during the pandemic times which followed this tax cut.

*Views expressed are the author’s own. The writer is Honorary Convener, Campaign to Save Earth Now.

Other articles by Bharat Dogra:

Himachal Pradesh: Apple growers continue protest over adverse impact of Big Business

80th Anniversary of Quit India Movement

Why the Struggle of Dhinkia Deserves Wide Support

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