ET Bureau If you do not kill the goose that lays the golden egg to take out all the little egglets inside it, have you forsaken gold or have you assured yourself of a steady supply of gold, whose net present value exceeds by far the value that would be obtained by killing the goose?
If you find the question absurd, you will find a part of the government’s Receipts Budget absurd. The chapter on revenue forgone lists the cost to the government on account of various tax concessions. This is completely absurd. By providing a particular tax break, you encourage a desirable income-enhancing activity, the tax proceeds of which you do not take into account when you compute your revenue forgone.
Suppose the government allows duty-free import of gold and uncut diamonds for processing as exports. The customs duty forgone would figure in the statement of revenue forgone. But tax receipts from the multiple streams of income created by the gems and jewellery export industry (personal income tax from those engaged in the export business, tax on profits of exporters, taxes from the consumption and housing purchases of those engaged in the industry, etc) would not figure in this.
Just presenting the revenue forgone leads to the misleading conclusion that the government has thrown away so much revenue.
Since people who make these statements are not deficient in intelligence, they have taken care to put out a caveat in the beginning of the section, “The estimates… (assume) that the underlying tax base would not be affected by the removal of such measures. As the behaviour of economic agents, overall economic activity…could change along with the elimination of the specific tax preference, the revenue implication could be different to that extent.” In plain English, “I have covered my posterior.”
Pray, why mislead and buy insurance against misleading at the same time? If the government wants to quantify the incentives, it should also present econometric estimates of the additional income it hopes to generate through the incentives, and the tax it would yield.
The present practice serves to debase the public discourse.
If you find the question absurd, you will find a part of the government’s Receipts Budget absurd. The chapter on revenue forgone lists the cost to the government on account of various tax concessions. This is completely absurd. By providing a particular tax break, you encourage a desirable income-enhancing activity, the tax proceeds of which you do not take into account when you compute your revenue forgone.
Suppose the government allows duty-free import of gold and uncut diamonds for processing as exports. The customs duty forgone would figure in the statement of revenue forgone. But tax receipts from the multiple streams of income created by the gems and jewellery export industry (personal income tax from those engaged in the export business, tax on profits of exporters, taxes from the consumption and housing purchases of those engaged in the industry, etc) would not figure in this.
Just presenting the revenue forgone leads to the misleading conclusion that the government has thrown away so much revenue.
Since people who make these statements are not deficient in intelligence, they have taken care to put out a caveat in the beginning of the section, “The estimates… (assume) that the underlying tax base would not be affected by the removal of such measures. As the behaviour of economic agents, overall economic activity…could change along with the elimination of the specific tax preference, the revenue implication could be different to that extent.” In plain English, “I have covered my posterior.”
Pray, why mislead and buy insurance against misleading at the same time? If the government wants to quantify the incentives, it should also present econometric estimates of the additional income it hopes to generate through the incentives, and the tax it would yield.
The present practice serves to debase the public discourse.
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