Total Tax Rate for Indian Companies is 35.9 per cent: FICCI-PWC Report

NEW DELHI. In a Total Tax Contribution Survey 2008 released by Dr. Amit Mitra, Secretary General of FICCI;  it has been concluded that Government tax collections in India are dependent on a few large corporate entities who contribute significantly to the Indian government’s total receipt of Corporate Tax and Fringe Benefit Tax.


Highlights of report are as under:

  • 41 companies contribute 9.7% (excluding municipal and local taxes) of total government tax receipts.
  • Participants encountered difficulties in obtaining data for few taxes, as they were embedded in cost of goods and services procured e.g. Stamp Duty, Customs Duty.
  • Average TTR of the participating companies is 35.9% of PBAT (represents PBT + all taxes).
  • The burden of taxation in India is manifested by the average TTC (i.e., the amount of total taxes borne and collected) by the participating companies i.e. 16% of their turnover.
  • Participating companies contributed substantially by way of taxes collected on behalf of government.  On average, participants collected Rs. 1.8 for every Re. 1 borne.

Amit Mitra demanded that Corporate Tax Rate should not be more than 25 per cent and Government should also consider grant of Investment allowance to Industry.


The Total Tax Contribution Survey 2008 by FICCI and PwC, is designed to improve a company’s understanding of its entire contribution in business taxes – both taxes borne and taxes collected on behalf of the Government, and also provide a measure of what companies pay into public finances, and as such, better meet needs of stakeholders than normal disclosures in companies financial statements. According to the survey, almost 10% of the Indian Government’s tax receipt is contributed by just 41 companies. The survey also revealed that for every Re 1 of taxes borne by the company it collected Rs 1.8, which indicates that the amount of taxes collected on behalf of the government was greater than the taxes borne by the company.


The Total Tax Contribution Survey 2008 collected data from 41 companies out of a total of 100 companies which were invited to participate in the survey. These companies are part of the S&P CNX Nifty and CNX Nifty Junior list, and represent 55% of the total market capitalisation and 54% of the total turnover of the 100 companies identified, and were across various industry sectors. The survey has been conducted for the first time in India using the methodology of PricewaterhouseCoopers global Total Tax Contribution Framework.


“As part of our continued efforts to better understand and improve the tax system in India, we partnered with PwC to understand the impact of taxes on businesses in India. Our endeavour is to fully understand the effect of all individual taxes on business to facilitate better management of these taxes and to highlight the impact of the tax system and its complexity in a rapidly changing business environment,” said Dr Amit Mitra, Secretary General, FICCI.


“The impact of taxation in India is manifested by the average amount of total taxes borne and collected by the 41 participating companies, i.e. 16% of their turnover. This is further substantiated by the average Total Tax Rate (TTR) of the participating companies, which is 35.9% of profit before all business taxes borne. The survey will help support constructive dialogue with the government regarding the future shape and competitiveness of the Indian tax system. It is important also for companies themselves to be aware of all the taxes that they pay when making commercial decisions in the context of specific transactions, and also regarding their business models in general”, said Ketan Dalal, Executive Director, PricewaterhouseCoopers.


The respondents to the Total Tax Contribution Survey 2008 were found to have made a significant contribution to Indian tax revenues, paying nearly Rs 43,049 crores as taxes borne and collected nearly Rs 41,853 crores as taxes on behalf of the government. The survey identified a total of 23 taxes at central and state level – both business taxes paid and collected by a company.


“The survey results showed that the 41 companies contributed 9.7% of total government tax receipts. This indicates that there is a need to increase the tax base by providing growth incentives for SMEs and providing investment related incentives to large corporates especially in the current economic environment. Further, the results showed that total Corporate Tax, DDT and FBT of these companies alone was around 18% of the Government’s total Corporate Tax, DDT and FBT collections.” added Ketan Dalal.


The PricewaterhouseCoopers Total Tax Contribution Framework is designed to help companies identify their overall tax contribution, either in a particular country, or on a global basis. Appreciation of the Total Tax Contribution concept has been widely recognised as a robust measure of taxes contributed by companies to national treasuries, and as a means of helping to improve companies’ focus on the risks and management of all taxes. The PricewaterhouseCoopers Total Tax Contribution Survey has now been conducted in a number of countries including Australia, Belgium, Canada, Netherlands, UK and the USA.


(Source: Allindiantaxes)


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