Gist of Editorials: Corporate Taxes Must Be Rationalised| GS – III

Relevance : GS Paper III ( 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.

 

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