May 31: Using pirated software could dent the state treasury by a huge amount, as big as $866 million. In 2009, as a result of the software piracy, the Indian state exchequer lost such a huge sum in net taxes, both indirect and direct. In 2010, the IT companies paid nearly $3.04 billion to the state exchequer in tax, says an IDC white paper on software piracy. Meanwhile with a software piracy rate of 65 per cent in 2009, only one-third of the overall PC software revenue was captured by the industry incumbents.
This is because businesses, which use pirated software, evade paying tax on licensed software, thus causing huge loss to the state exchequer and disruption of the domestic software eco-system. Consequently, the state exchequer loses on tax receipts from their sale. By 2014, the study estimates the tax receipt loss will grow up to $5.7 billion based on the 15 per cent CAGR on IT spending.
“Indian IT industry remains vulnerable to high rates of piracy resulting in value erosion across various fronts. This in turn affects the entire value chain from distributors to traders to resellers and hampers job creation in other areas that are heavily dependent upon robust and protected software eco-systems,” Mr Keshav S. Dhakad, chairman, India committee of Business Software Alliance, who sponsored the study said. The study also found that reducing software piracy would stimulate spending throughout the IT value chain. For example, if PC software piracy is curtailed by 5 per cent in 2011, the incremental GDP contributions will be $790 million, tax revenue of $95 million and 26,108 new high-skilled jobs will be created.
In some countries usage of unlicensed and pirated software in companies has already been declared as a form of tax evasion. Mr Hari Narain, an evangelist of licensed software, says “Using pirated products could lead to data loss and increase the chances of virus infections. Especially, when you are in a business, it calls to be professional by using licensed products.”