In India, SEZs are being set up across the country since legislation was passed in 2005. Activists in India have protested against the SEZs because they say that farmers are being forced off their land, with little or no compensation, to make way for MNCs building factories and industrial parks. In addition to these problems, the excessive tax breaks offered by the SEZs deprive the government of revenue that could be used for social spending.
Companies operating in the SEZs get total tax exemption for the first five years, 50 per cent for the next two years and up to 50 per cent exemptions on profits that are reinvested for another three years.
The Indian Ministry of Finance estimates that in 2008/09, foregone corporate income taxes amounted to 69,000 Crore Rupees (approximately US$15 billion), as a result of tax exemptions in SEZs as well as other corporate tax deductions.
Jayati Ghosh, professor of economics at Jawaharlal Nehru University and director of International Development Economics Associates, says: ‘People are rightly upset about the land-grabbing that is going on for SEZs. But we have to face the reality that there is going to be change in land use as India develops. What is important is how you compensate and rehabilitate those people who were on the land. …The real issue is that these tax concessions are obscene. Why should companies in SEZs pay no tax, while in India we still don’t have money for universal schooling? We spend only 4 per cent of GDP on education, instead of the aimed-for 6 per cent. If we had full payment of existing taxes we would have enough money to properly educate our children or for a public health centre in every village. …To give up such a huge amount of government resources is of course a major crime given the needs of Indian society today and in the future.’