Relevance : GS Paper IIIÂ ( Economy)
[ 1100 words summarized to 170 ]
For kick-starting the investment cycle, the Centre has to cut tax rates for large companies.
Corporate tax issues in India
- Corporate tax rates in India are too high.
- Corporate tax rate was lowered to 25 per cent from 32 only for some companies.
- Larger companies have not seen any change in the tax rate.
- The tax burden for these companies has in fact moved higher.
- Withdrawal of some of the corporate tax incentives.
- Due to inability of GST to reach its full potential , the Centre is in no position to slash corporate tax rates as of now.
Global comparison
- The average corporate tax rate globally has declined to 20.6 currently.
- The current peak corporate tax rate in India, at 35 per cent, is the highest among the BRIC as well as the Asia-Pacific countries.
Way forward
- Tax on income of companies needs to gradually slide lower.
- Cut in corporate tax rate for larger companies should be done soon.
- Reduce tax rates, which can result in higher tax compliance.