A study on taxes paid by Indian companies has found that almost 10 per cent of the government’s total tax receipts is contributed by just 41 firms. The study revealed that companies were collecting Rs 1.80 for every rupee of taxes borne by the firm. This implies that companies act as collecting agents for the government. If a tax paid is deduced from the company’s turnover or shown as expenditure in the profit and loss statement, it is treated as tax borne. For examples, tax deducted at source (TDS) on employee salaries paid or consultancy fees paid would constitute the additional 80 paise of taxes collected by the companies, according to a joint survey on total tax contribution (TTC) 2008 by industry body Federation of Indian Chambers of Commerce and Industry (Ficci) and global audit major PricewaterhouseCoopers (PwC).
The TTC survey 2008 collected data from 41 companies out of the 100 which belong to S&P CNX Nifty and CNX Nifty Junior list. These firms have a total turnover and market capitalisation of Rs 6,84,404 crore and Rs 10,718,84 crore, respectively. “The impact of taxation in India is manifested by the average amount of total taxes borne and collected by the 41 participating companies, which is 16 per cent of their turnover. This is further substantiated by the average total tax rate of the participating companies, which is 35.9 per cent of profit before all business taxes borne,” said Ketan Dalal, executive director, PwC. The survey identified a total of 23 taxes at central and state level — both business taxes paid and collected by a company. Of 41 companies, 16 were from manufacturing sector, 8 from financial sector, 5 from IT and 12 from other sectors. He added that this survey would help support constructive dialogue with the government regarding the future shape and competitiveness of the Indian tax system. “This indicates that there is a need to increase the tax base by providing growth incentives for SMEs. Further, the results showed that total Corporate Tax, Dividend Distribution Tax (DDT) and Fringe Benefit Tax (FBT) of these companies alone was around 18 per cent of the government’s total Corporate Tax, DDT and FBT collections,” added Dalal.
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