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India lost $866 mn in taxes to software piracy in FY'09: Study
June, 01st 2011

Indian government may have lost as much as $866 mn in taxes to software piracy in 2009, a study said today.

With software piracy rate at 65 per cent (more than six out of 10 computer software installed were not paid for) in 2009, the exchequer tax receipts loss was about $ 866 mn in net taxes, both indirect and direct, a joint study by BSA- IDC said.

"Software piracy is a unique crime as most of illegal and unlicensed usage of software occurs in otherwise legal and legitimate businesses, depriving government of legitimate taxes from software sales and distribution," IDC Asia/Pacific Research Manager (AP Consulting) Harish Taori told reporters here.

Business Software Alliance (BSA) is a software industry body working in 80 countries to expand software markets. Its members include Adobe, Apple, HP India, Microsoft and Symantec among others. IDC is a global IT research firm.

According to the study, indirect tax receipts from software sales would have contributed $ 553 mn, while services-related business transactions and direct tax receipts would be around $ 313 mn in 2009.

The study found that in 2010, IT companies paid nearly $ 3.04 bn to state exchequer in tax. By 2014, the tax receipt is expected to grow to $ 5.7 bn with IT spending expected to grow at a CAGR of 15 per cent until 2014.

According to IDC estimates, losses of over $ 2.27 bn was caused in 2009 on account of unlicensed software sold in India in 2009 (with piracy of packaged software at 65 per cent).

The total impact in 2009 would then come to about $ 3.13 bn for 2009, BSA India Committee Chair Keshav S Dhakad said.

"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," Dhakad said.

He added that there was an urgent need to facilitate the creation of a strong intellectual property compliance and accounting governance model in companies to account for usage of genuine and licensed software as part of their internal and external audits.

The study said that if PC software piracy is curtailed by five per cent in 2011, the incremental potential industry revenues or the GDP contributions could be $ 790 mn, tax revenue could be $ 95 mn and 26,108 new high-skilled jobs could be created.

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