The rate of growth of personal income tax collections during 2013-14 was nearly double that of the corporate tax mop-up. The growth in corporate tax collection was so low that it lagged behind even the Gross Domestic Product (GDP).

Finance Ministry data shows that individuals paid 20.51 per cent more income tax in 2013-14 than in the previous financial year. Whereas the rate of growth in the case of corporate income tax payers at 10.76 per cent lagged, even failing to keep pace with the 12.3 per cent rate of growth of the ‘nominal’ GDP (which factors in inflation).

Corporate tax collections in 2013-14 took a beating due to high inflation during most of the year. Profits shrank as high inflation made raw materials and inputs costlier. Lower earnings resulted in less taxes paid.

However, for individuals, tax is paid on salaries irrespective of the cost of living. High inflation hurts individuals by reducing their purchasing power. But tax is collected and paid on the total earnings and often even deducted at source before an individual receives the amount.

So whereas higher onion prices would lower a restaurateur’s tax outgo by depressing profits, it would not be so for a salaried tax payer’s rising vegetable bills. (The Hindu)