Corporate Tax Revenue in 1990-91-Some Methodological Issues

Better tax compliance was expected as a consequence of the abolition of Investment Allowance/Investment Deposit Account together with other changes in the tax structure. This article examines the extent of additional resource mobilisation possible using four different methods of computation, viz, estimated new investment in plant and machinery, estimated investment allowance provision, likely increase in effective tax rates and weighted average of effective tax rates of private and government companies. It concludes that additional revenue of the order envisaged is feasible if the leakages in the corporate tax system are plugged.