The Hindu : Lower corporate tax rate sought

Online edition of India's National Newspaper
Thursday, Dec 11, 2003

Business

Business

Lower corporate tax rate sought

By Our Special Correspondent

NEW DELHI DEC. 10. The PHDCCI in its pre-budget memorandum submitted to the Union Finance Minister, Jaswant Singh, has highlighted that the corporate tax rate for resident companies required to be further lowered to 30 per cent (with no surcharge) and ultimately to 25 per cent in the next two or three years for better voluntary tax compliance.

At present, the uniform rate of corporate tax for resident companies is 35 per cent, with a surcharge of 2.5 per cent as a special levy. This is excessive in comparison with other countries which tax the corporates at 25-30 per cent. Besides, for the smaller companies, there should be lower rates of tax on lower incomes just as in case of individuals, that is 15 or 20 per cent only on a total income unto Rs. 1 lakh.

The chamber has also said that phasing out the deduction under Sec. 80HHC should be re-considered and the benefit under Sec. 80HHC should be allowed at the rate 10 per cent of foreign exchange earned/received during the year by the assessee.

The levy of Minimum Alternate Tax (MAT) should be reviewed and abolished. MAT has reduced the corporate savings thus compelling corporations to postpone their investment plans for modernisation, and expansion.

It has adversely affected the profitability of exporting companies and has caused serious repercussions to companies operating at bottom line of profitability particularly when the interest rates on commercial borrowings are still high.

The reason assigned for introducing MAT was the phenomenon of zero tax companies.

It is unfortunate that the Government has not recognised the advantages to the overall economy resulting from operations of such companies, which in the absence of any other incentive, helped in generating and creating jobs and contributing to the national GDP. The corporate tax collection may have suffered due to zero corporate tax, but such companies have helped in increasing the indirect tax collection as well as direct tax collection on personal incomes.

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