India’s Tax Revenues Suffer at Hands of Software Piracy

June 1, 2011 Taxation in India

Software PiracyThe government of India loses millions in national tax revenues every year due to the piracy of computer software, and even a marginal lowering of the piracy rate would see an extra USD 95 million flow into the government’s coffers.

A new study was jointly released on May 31st by the Business Software Alliance (BSA) of India and the International Data Corporation (IDC) of India, aiming to quantify the effects that software piracy has on tax revenues for the government of India.
According to conclusions drawn in the report, the government of India lost more than USD 866 million in tax revenues over the course of 2009, due to purchases of pirated software by businesses and private individuals. The missing revenues were comprised of USD 533 million in loses of indirect taxes, and USD 313 million in losses of overall direct tax collections.

It is estimated that 65 percent of all software purchased in India are counterfeit copies. The cumulative cost of the software illegitimately used over the course of 2009 was USD 2.27 billion. The authors of the report estimated that the software piracy led to a total domestic economic loss in 2009 of USD 5.3 million, after post-sales services, tech support and service charges are counted. The chair of the committee of the BSA Keshav Dhakad commented on the findings, saying, “…high rates of piracy in India results in a lot of value erosion, which in turn affects the entire value chain from distributors to traders to resellers, and hampers job creation in the areas of sales, marketing, distribution, maintenance, development, etc.”

Keshav Dhakad also said that the government needs to take action to support intellectual property protection rules, and instate new tax and accounting regulations that encourage the use of genuine software. He added that if such rules were instated and the rate of piracy was reduced by 5 percent in 2011, the government would see an additional USD 95 million in tax revenues, and growth in the IT sector of USD 790 million and the creation of over 26 000 new jobs.

Photo by aheavens