tax cut

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 availability for priority tasks. What we should not forget is that many important schemes and programs have been facing severe resource constraints. Allocations less than needed have been made for important welfare and development programs and then on top of this 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.

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

1.Ministry of Environment, Forests and Climate Change—Rs. 4486 crore

  1. Ministry of Labor and Employment—Rs. 23003 crore
  2. Ministry of Minority Affairs—Rs. 8351 crore
  3. Department of Social Justice and Empowerment—Rs. 16771 crore
  4. Department of Empowerment of Persons with Disabilities—Rs. 1864 crore
  5. Ministry of Tribal Affairs—Rs. 12821 crore
  6. Ministry of Women and Child Development—Rs. 42395 crore
  7. Ministry of Youth Affairs and Sports—Rs. 4384 crore
  8. Department of Science and Technology—Rs. 10300 crore
  9. Department of Health Research—Rs. 4984 crore
  10. Ministry of Ayush—Rs. 3910 crore
  11. Department of Pharmaceuticals—Rs. 1009 crore
  12. Ministry of Culture—Rs. 4629 crore
  13. Ministry of Development of North-Eastern Region—Rs. 4510 crore
  14. Department of Animal Husbandry and Dairying—Rs. 5175 crore
  15. Department of Water Resources, River Development and Ganga Rejuvenation—Rs. 14650 crore
  16. Ministry of Micro, Small and Medium Enterprises—Rs. 12152 crore
  17. Ministry of New and Renewable Energy—Rs. 6051 crore
  18. Ministry of Panchayati Raj—Rs. 1184 crore
  19. Ministry of Planning-Rs. 1316 crore

Total—Rs. 183945 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 organized 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.

Bharat Dogra is Honorary Convener, Campaign to Save Earth Now. His recent books include Planet in Peril, Man over Machine and A Day in 2071.


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