FM as Robin Hood – albeit selectively

He writes off Rs 61,765 crore corporate taxes. That’s for 2011-12, in 2012-13, he will write off Rs 68,007 crore

February 28 2013 http://www.governancenow.com/views/columns/fm-robin-hood-albeit-selectively

Finance minister P Chidambaram may have built a Robin Hood-like image for himself by imposing a ‘super-rich’ tax on high net worth individuals (HNIs) and corporate bodies while dramatically increasing funds for social sector welfare schemes, he continues to write off huge amounts of tax liabilities of these very super-rich too.

The statement of revenue foregone, released with the other budget documents, shows he wrote off Rs 61,765 crore of corporate tax in 2011-12 and proposes to write off a higher Rs 68,007 crore projected for 2012-13.

But that is only for the corporate bodies. He has also written off Rs 7,145 crore tax liabilities of non-corporate firms like, partnership firms and Association of Persons (AoPs) or Body of Individuals (BoIs) in 2011-12 and proposes to write off Rs 8,606 crore projected for 2012-13.

In all, Chidambaram has written off Rs 5,33,582 crore for 2011-12, including revenue foregone in corporate and personal income tax, excise and custom duties. It is projected at Rs 5,73,626 crore for 20012-13.

The statement concludes rather sadly, “To conclude, the total revenue foregone is showing an upward trend, both for direct and indirect taxes.”

There is, however, not a word about arresting this trend.

Chidambaram may talk about fiscal responsibility and the need to contain fiscal deficit, writing off taxes of the super rich is surely not in his agenda.

To be fair to him though, it must be said that he has dramatically increased fund allocations for every social sector welfare measures.

Rural development ministry gets Rs 80,194 crore against last year’s Rs 55,000 crore, which means more funds for backward and Maoist-affected areas and greater and heightened coverage under various welfare schemes – MNREGS, PMGSY, IAY etc, run by the ministry. The health ministry gets Rs 37,330 crore, up from Rs 25,927 crore last year. Education gets Rs 65,867 crore, up by 17 percent from the previous year. Similarly, agriculture, sub-plans for SCs and STs, mid-day meal for children, food security cover and credit for farmers have seen higher allocation and a first time Rs 1,000 crore allocation for women’s safety. He may be emphasizing again and again on fiscal responsibility, limiting fiscal deficit etc but you can’t accuse him of being tight-fisted when it comes to social sector which is critical for sustaining growth or making GDP-linked growth story meaningful.