Corporate socialism's 2G orgy

P. Sainath
Comment (66)

The Union budget writes off Rs.240 crore in corporate income tax every single day on average — the
same amount leaves India each day in illicit fund flows to foreign banks.

In six years from 2005-06, the Government of India wrote off corporate income tax worth Rs.3,74,937
crore — more than twice the 2G fraud — in successive Union budgets. The figure has grown every
single year for which data are available. Corporate income tax written off in 2005-06 was Rs.34,618
crore. In the current budget, it is Rs.88,263 crore — an increase of 155 per cent. That is, the nation
presently writes off over Rs.240 crore a day on average in corporate income tax. Oddly, that is also the
daily average of illicit fund flows from India to foreign banks, according to a report of the Washington-
based think tank, Global Financial Integrity.

The Rs.88,263 crore covers only corporate income tax write-offs. The figure does not include revenue
foregone from higher exemption limits for wider sections of the public. Nor higher exemptions for
senior citizens or (as in past budgets) for women. Just income tax for the big boys of the corporate
world.

Pranab Mukherjee's latest budget, while writing off this gigantic sum for corporates, slashes thousands
of crores from agriculture. As R. Ramakumar of the Tata Institute of Social Sciences (TISS) points out,
the revenue expenditure on that sector “is to fall in absolute terms by Rs.5,568 crore. Within agriculture,
the largest fall is to be in crop husbandry, with an absolute cut of Rs.4,477 crore.” Which probably
signals the death of extension services, amongst other things, in the sector. In fact, “within economic
services, the largest cuts are to be in Agriculture and Allied Services.”

Even Kapil Sibal cannot defend the revenue losses as notional. For the simple reason that each budget
sums up these numbers clearly in tables within a section called ‘Statement of Revenue Foregone.' If we
add to this corporate karza maafi, revenue foregone in customs and excise duty — also very largely
benefiting the corporate world and better off sections of society — the amounts are stunning. What, for
instance, are some of the major items on which revenue is foregone in customs duty? Try diamonds and
gold. Not quite aam aadmi or aurat items. This accounts for the largest chunk of all customs revenue
foregone in the current budget. That is, for Rs.48,798 crore. Or well over half of what it takes to run a
universal PDS system each year. In three years preceding this one, the customs write-off on gold,
diamonds and jewellery totalled Rs.95,675 crore.

Of course, this being India, every plunder of public money for private profit is a pro-poor measure. You
can hear the argument already: the huge bonanza for the gold and diamond crowd was only to save the
jobs of poor workers in the midst of a global economic crisis. Touching. Only it didn't save a single job
in Surat or elsewhere. Many Oriya workers in that industry returned home jobless to Ganjam from Surat
as the sector tanked. A few other workers took their own lives in desperation. Also, the indulgence for
industry predates the 2008 crisis. Industry in Maharashtra gained massively from the Centre's Corporate
Socialism. Yet, in three years before the 2008 crisis, workers in the State lost their jobs at an average of
1,800 a day.
Returning to the budget: There's also the head of ‘machinery' with its own huge customs duty
concessions. That includes surely, the crores of rupees of sophisticated medical equipment imported by
large corporate hospitals with almost no duty levied on it. The claim of providing 30 per cent of their
beds free of charge to the poor — something that has never once happened — is an excuse to dole out
these ‘benefits' (amongst others) to that multi-billion rupee industry. Total revenue foregone on customs
duty in the present budget: Rs.1,74,418 crore. (Which does not include export credit-related numbers).

With excise, of course, comes the standard claim that revenues foregone on excise duty translate into
lower prices for consumers. There is no evidence provided at all that this has actually happened. Not in
the budget, not elsewhere. (Sounds more like the argument now making the rounds in some Tamil Nadu
villages that nothing was looted in the 2G scam — that's the money translating into cheaper calls for the
public). What is clearly visible is that the write-offs on excise directly benefit industry and business.
Any indirect ‘passing on' to consumers is a speculative claim, not proven. Revenue foregone on account
of excise duty in this budget: Rs.1,98,291 crore. Clearly more than the highest estimate of the 2G scam
losses. (The preceding year: Rs.1,69,121 crore).

Also fascinating is that the same classes benefit in multiple ways from all three write-offs. But how
much does revenue foregone under corporate income tax, excise and customs duty add up to across the
years? We have baldly stated budget figures for six years starting 2005-06, when the total was
Rs.2,29,108 crore. To the current budget where it is more than double that sum at Rs.4,60,972 crore.
Add up the figures since 2005-06 and the grand total is Rs.21,25,023 crore. Or close to half a trillion
U.S. dollars. That is not merely 12 times the 2G scam losses. It is equal to or bigger than the Rs.21 lakh
crore sum that Global Financial Integrity tells us has been siphoned out of this country and illegally
stashed away in foreign banks since 1948 ($ 462 billion). Only, this loot has happened in six years
starting 2005-06. The current budget figure for these three heads is 101 per cent higher than it was in
2005-06 (see Table).

Unlike the illicit fund flows, this plunder has a fig leaf of legality. Unlike those flows, it is not the sum
of many individual crimes. It is government policy. It is in the Union budget. And it is the largest
conceivable transfer of wealth and resources to the wealthy and the corporate world that the media never
look at. Oddly, the budget itself recognises how regressive this trend is. Last year's budget noted: “The
amount of revenue foregone continues to increase year after year. As a percentage of aggregate tax
collection, revenue foregone remains high and shows an increasing trend as far as corporate income tax
is considered for the financial year 2008-09. In case of indirect taxes, the trend shows a significant
increase for the financial years 2009-10 due to a reduction in customs and excise duties. Therefore, to
reverse this trend, an expansion in the tax base is called for.”

Rewind a year further. The 2009-10 budget says the same thing in almost identical words. Only the last
line is different: “Therefore it is necessary to reverse this trend to sustain the high tax buoyancy.” In the
current budget, the paragraph is absent.

This is the government that has no money for a universal PDS or even an enhanced one. That cuts
anyway meagre food subsidies from the largest hungry population in the planet. That, at a time of rising
prices and a great food crisis. In a period when its own economic survey shows us that the daily average
net per capita availability of foodgrain for the five year period 2005-09 is actually lower than it was in
1955-59 — half-a-century ago.