Survey Reveals Extent Of Top Indian Companies' Tax Burden

by Mary Swire, Tax-News.com, Hong Kong

02 April 2009

41 top Indian companies contribute almost 10% of the India's tax revenue. A study of the largest Indian Companies' total tax contribution has highlighted the magnitude and complexity of the Indian taxes borne or collected by these companies and supports the need for constructive dialogue between government and big business about the future shape and competitiveness of the Indian tax system, according to a joint survey between PriceWaterhouseCoopers and the Indian Chamber of Commerce, Ficci.

The survey gathered information from 41 of India's top hundred companies and covered 23 different types of Central and State level taxes but not municipal and other local taxes. It found that, whilst the government claim that the corporate tax rate of 33.66% reduced to an average of 21.6% after generous allowances, the plethora of other taxes - especially Dividend Distribution Tax, Fringe Benefit Tax and Stamp Duties brought the effective rate back up to an average of 35.9% overall and over 50% of profit for those companies not in the financial and manufacturing sectors. In terms of all the companies' turnover, this represented 16% borne directly by the companies.

For every rupee borne by the companies a further 1.8 rupees was collected for the revenue by way of, for example, excise duties, VAT, service taxes and employees' income tax deducted at source. The survey concluded that the tax burden of the largest companies was disproportionate and that the tax base needed to be widened with reductions of corporate tax rates and growth incentives for SMEs.

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