- Wealth PMS (50L+)
With a couple of days to go for the Union Financial Budget of 2016-17, we take a closer look at the Union Financial Budgets of the previous year to see how the numbers add up.
You can view the previous posts here:
As part of this feature, we take a look at Government Revenue – the one decent barometer measuring the government performance or say a report card of how our finance ministers (master of coins as described in The Game of Thrones) both past and present have been performing. Do note: this excludes all politics, mud sheds, gali galocha, hulla bulla. We don’t side with the left or the right, neither do we switch camps like mantri mahodays or go crazy like the guy from Not Times Now.
For the government, there are multiple sources of revenue. There are 2 types of revenues that the government earns.
Other than these there are Interest Receipts, Capital Receipts and Revenue Receipts. We don’t intend to bore you with the details and would love to completely skip them and talk today only about the Tax and Non-tax revenue.
Revenue receipts refer to those receipts which neither create any liability nor cause any reduction in the assets of the government. Taxes are revenue receipts, and assets sales are capital receipts.
The government’s revenue receipts for the year 2015-16 stood at Rs. 11,415.75 billion [Budget Estimate] compared to Rs. 11,262.94 billion [Revised Estimates]. We have down a long road from the Economic Reforms of 1990-91 when the revenue receipts were Rs. 660.3 billion or from the 2001-02 Tech Bubble at Rs. 2,013.06 billion.
Tax Revenue and Non-tax Revenue which both together make up the revenue receipts. Contribution of the Tax Revenue has always been in the lower 80% while the contribution of Non-tax Revenue has hardly changes since 1970-71. Its avg. contribution has been 24.17% with its highest contribution during the 2001-02 year at 33.67% when Tax Revenue was at its worst at 66.33% since 1970-71.
Tax Revenue is comprised Direct Tax which is further comprised of Personal Income Tax and Corporation Tax and then there is Indirect Tax.
We let the charts explain:
Personal Income Tax is the tax paid on the amount a person earns from his salary and Corporate Tax is the same with the difference that this tax is applicable for non-living bodies i.e. Companies.
From Rs. 1.14 billion Personal Income Tax and Rs. 3.71 billion Corporate Tax, we have come to Rs. 1,987.6 billion for Personal Income Tax and Rs. 2,964.31 for Corporate Tax.
Since 1970-71 to 2015-16 [BE], we have had -10 and +35 years while for Corporate Tax it has been -4 and +41 years in terms of tax revenue. Both Personal Income Tax and Corporate Tax have converged only once i.e. in 2000-01 during the Tech Bubble.
g in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.