Everything Else being Equal
-------------------------
WHAT ?
·
Last week , Donald Trump reduced Corporate Income Tax from 35 % to 15 %
for American companies
·
Earlier , UK had announced reduction in Corporate Tax from 30 % to 20 %
. Several EU countries are planning similar reductions
·
Closer at home , in his last budget , Shri Arun Jaitleyji had reduced
Corporate Tax from 30 % to 25 % , for companies with annual revenues of less
than Rs 50 crore
·
News reports say that the Finance Ministry is considering to extend this
benefit to companies with revenues of less than Rs 500 crores , in the
forthcoming budget
There is
sufficient evidence to show that :
·
Lower tax rates lead to better tax compliance and higher , overall tax
collections
·
Lower tax rates also result in expanding the tax-base ( of tax payers )
This
phenomenon assumes significance in view of the following declaration by Shri Hasmukh Adhia , Union revenue Secretary ,
last Saturday :
“
Close to 9 lakh registered companies have not been filing annual returns with
the Ministry of Corporate Affairs ( MCA ) and are a potential source of money
laundering
Focus
should be now on technology . There should be no need to call anybody a thief.
The machine should itself catch the thieves “
WHY ?
·
To attract investment ( both local as well as Foreign ) in Mfg /
Services / Infrastructure ( by enabling companies to plough back increased
profits )
·
To generate jobs for millions of unemployed youth
·
To prevent companies from going abroad to make more profits in countries
where tax rates are lower
·
To make companies globally competitive
·
To increase share of international trade by increasing exports
WISHFUL
THINKING ?
Not entirely !
But , by itself , lowering of Corporate
tax is not a “ sufficient “ condition
for achieving the five “ Objectives “
listed above
For sure , no company hires more number
of people than it needs , just because it can now “ afford “ ( due to bigger
profits ) !
If we are smarter than those other
countries , we should link lower Corporate Tax liability with each “ ADDITIONAL UNIT OF NEW JOB CREATION “ , as explained in :
Incentivizing
Employment ? ( 24 Aug 2016 )
NEXT :
By “ Globally Competitive “ , I suppose
, Economists ( - and Politicians ? ), mean :
Creating a LOW
COST ECONOMY
That is not going to happen just because
of “ LOW CORPORATE TAX “
!
It will happen only when we implement
measures to facilitate “ LOW INPUT COSTS “
Inputs of all kinds as explained in :
--------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------
If there is a political will , India can
beat the menace of “ Anti-Globalization / De-Globalization “ ,
by turning itself into a LOW COST ECONOMY
By itself , reducing
Corporate Tax will not take us very far !
01
May
2017
www.hemenparekh.in / blogs
No comments:
Post a Comment