The government during 2009-10 is estimated to forego revenues of over Rs 5 lakh crore, which amounts to 50 percent of its annual expenditure due to various tax concessions given to the prop up the industry hit by the global financial turmoil.

"The amount of revenues foregone continues to increase year after year...to reverse this trend, an expansion in the tax base is called for," said Finance Ministry while providing details of revenue foregone in the Budget papers.

The revenue foregone is estimated to rise from Rs 4.14 lakh crore in 2008-09 to Rs 5.02 lakh crore in the current fiscal. As a percentage of aggregate tax collection, the tax forgone will move up from 68.59 per cent 79.54 per cent during the same period.

"As a percentage of aggregate tax collection, the revenue foregone remains high and shows an increasing trend as far as corporate income tax (is concerned)... for the financial year 2008-09. In case of indirect taxes, the trend shows a significant increase for 2009-10 due to reduction in customs and excise duties", the papers said.

Revenue foregone assumes significance when compared with the Government's total expenditure which was a little over Rs 10 lakh crore during 2009-10 after hiking public outlay to provide relief to the crisis-hit industry.

Revenue foregone on account of customs duty concessions amounted was to the tune of Rs 2.49 lakh crore followed by excise at Rs 1.71 lakh crore, corporate tax at Rs 79,554 crore and personal income tax at Rs 40,929 crore, reveal the Budget papers.

The only saving grace was the export sector, but that was because of wrong reasons. Revenue foregone on account of tax concessions provided to export promotion schemes dropped to Rs 43,622 crore from Rs 49,053 crore during 2008-09, mainly on account of slowdown of shipments due to crisis in the developed countries.

As regards the corporate taxes, the Budget papers reveal that effective rate during 2008-09 was 22.8 per cent as against the actual rate of 30 per cent plus education cess and surcharge.

The Finance Ministry's analysis was based on tax returns filed by over three lakh companies and business entities.

Companies take advantage of various concessions to reduce tax liability, while individuals park their funds in tax savings scheme to reduce tax burden.

On the indirect taxes side, the government provides tax holidays to encourage specified sectors and incentives to promote exports.

As part of his Budget proposals for FY2011, Finance Minister Pranab Mukherjee raised the incidence of minimum alternate tax to 18 per cent from 15 per cent. The decision is aimed at raising tax realisation from corporate.