constituted - of Planning Commission

tax on other incomes (personal income tax). The forecast is based on the actualdata for 2003-04 to 2010-11 and on 2011-12 (BE). The growth in corporatetaxes was taken as a function of the growth rate in GDP, the inflation rate, thestatutory tax rate and the statutory tax base. In the case of corporation tax, thetax rates, inclusive of surcharge and cess, have been lowered from around 36per cent to around 32.5 per cent in the period between 2003-04 and 2010-11.This has also been accompanied by measures to widen the statutory tax base byincreasing the rate of Minimum Alternate Tax (MAT) on corporate incomes.The corporate tax to GDP ratio has risen year-on-year in five and fallen in twoyears in this period. Going forward, corporate tax rates as proposed in theDirect Taxes Code Bill, 2010 are slated to go down further to 30 per cent (fromthe current 32.4 per cent). Though tax concessions like profit linked deductionsare being phased out, the effect of the concessions which will be availed for theunexpired period will impact the collection over the next plan period. Similarly,for personal income-tax, the exemption limits have been enhanced during thisperiod, the income slabs have been expanded and the highest rate, inclusive ofsurcharge and cess, has been lowered from around 34 per cent to about 31 percent and to 30 per cent, going forward. Thus, the tax rates are slated to belowered and the tax slabs (for personal income tax) are to be expanded asenvisaged in the Direct Taxes Code Bill, 2010. These changes in the tax baseand rates make it arduous to base projections on a trend growth rate in view ofthe complex adjustment required to smoothen data.The method used to project direct tax collections over the five year period is touse a year on year moving average of the change in the ratio of tax collectionsto the GDP. For projecting the corporate tax to GDP and personal income taxto GDP ratios for 2012-13, the average of the year on year change in theseratios between the year 2003-04 and 2011-12 (BE) has been computed. For thesubsequent year’s projections, the same method has been followed by adoptingthe moving average method after dropping the first year projection andincluding the projection made for the immediately previous year. A refinementWorking Group Report on Centre’s Financial ResourcesPage-14