Thread by @TowardsLiberti

All of us thought that govt is doing a great sacrifice of forgoing ₹1,45,000 Cr revenue for reviving the economy, esp. when the govt is struggling with its finances. Great.

Where is this number ₹1,45,000 Cr coming from? Is it real or fake as usual? And, why now?
(1/17)

Background: Govt is facing a huge deficit in corporate tax collections this year. It is going to worsen in upcoming quarters.

This for the April-June period (Q1-FY19-20). You can imagine what's the next quarter going to be like. (2/17)

timesofindia.indiatimes.com/city/dehradun/…

Take a look at the budget estimates. Govt has a very ambitious target of ₹7.66 lakh Cr from Corporation taxes. This looks impossible now.

But then, will it even achieve last year's estimate of ₹6.71 lakh crores? Let's analyse. (3/17)

I searched for all listed companies which paid more than 500 crores in taxes last year. Found 94 companies.

Together they paid ₹2.11 lakh Cr. out of ₹6.71 lakh Cr. estimate last year i.e, 31.5%. That's a fairly big sample size, nearly double of NIFTY. (4/17)

Now, I checked how are these companies doing in terms of tax payment Q1, this year.

I divided them into two sets. The companies that gave more tax than Q1, last year is below.

54 companies, paid a ₹7,880.19 crores A very impressive gain of 34.56%. (5/17)

Now, the companies paying less tax than the same quarter, last year.

50 companies, ended up paying ₹9,316.47 crores less than Q1 last year. That's a huge 31% loss. (6/17)

What's the grand total? Its -2.72% loss in tax revenue in just one quarter, this year.

Then I increased the sample size. Total 1954 companies, representing 41.7% of tax revenue last year.

It also shows a worrying -1.39%! (7/17)

What does this mean? Let's be optimistic and assume that we achieve the same number as last year. That's ₹6.71 lakh crore instead of ₹7.66 lakh crore.

That's a whopping of ₹95,000 crores deficit!

Now, what will you do if you are smart like Modiji?

Spin it around! (8/17)

What Ms. Nirmala Sitharaman announced on Friday seems "historic".

But, then try to do the math of the real gains for all companies. You'll realize the trick.

Will these companies get a benefit of 1.45 lakh Cr or less? If less, how much is that? (9/17)

We that all of these companies were paying 35% corporate tax including surcharges. Actually, it varies from company to company, industry to industry.

Eg: My fav Reliance's effective tax rate is only 25.76%. It's because of all deductions provided for depreciation etc. (10/17)

Read this TOI article. Effective tax rate of 21/30 Sensex firms is just 25.7%. They were already getting benefits better than the new 25.17% (incl cess).

It is Financial Institutions and FMCG companies who are going to get the most out of it.

(11/17)
timesofindia.indiatimes.com/business/india…

Now, read the press release by the Finance Ministry. Most important points:

1. Migration to the concessional regime of 25.17% is optional.
2. Migration is permanent, can't go back to exemptions later.
3. The loss estimation of 1.45 lakh crore.

(12/17)

Now, if 21/30 Sensex companies on an average are paying the effective rate of 25.7%, what is the real loss for govt? Definitely nowhere near 1.45 lakh crore.

My optimistic wild guess is around 40k Cr. Experts, prove me wrong with math, but not with another wild guess. (13/17)

When you are losing something big, make it look like a sacrifice. People will sing bhajans!

Now, that's the trick pulled out by govt.

Anyways I am losing 95-100k, spin and make it look like a great 145k sacrifice and be the Messiah of the economy. (14/17)

Also, realize that bulk of this (40k Cr) is going to already profitable banks like HDFC, Axis, Kotak Mahindra etc.

Do you seriously think that they were cash strapped before and going to give more credit now and revive the economy when there is no demand? (15/17)

If the intentions were good, and govt was willing to give away so much money, they should have scrapped the surcharge and cess, which comes to 1,08,688 crores.

It would have benefitted every company across the board. But then...

(16/17)

Watch this ground report by @thewire_in from Chandni Chowk, Delhi. Go to 9:15, if you don't have time.

This slowdown is once in a lifetime, truly "Historic"!

(17/17)