Indian industry chambers CII and Ficci pitched for a reduction in taxes during a pre-budget meeting with Finance Minister Arun Jaitley as analysts discuss the need for a cut. While CII decided to limit itself to demanding a flat 18 per cent tax on companies, that pay as much as 35 per cent currently, Ficci opted to seek a more broad-based reduction at 20 per cent, probably realising that it will not be easy for the Centre to pare rates only for companies.
CII president Shobana Kamineni said a lower rare of tax will encourage investment and create jobs, which were crucial for the economy. The chamber suggested that all cess and surcharges, along with exemptions should be withdrawn to make things simpler. Ficci, meanwhile, suggested that the government should consider across-the-board tax rate cuts for businesses and individuals to spur domestic investment and demand. The group said, “Many key global economies are opting for significant rate cuts, for instance, the US is on the verge of historic tax reform that proposes to cut the corporate tax rate from a top rate of 35 per cent to 20 per cent as well as provide relief to individuals. The US tax reform also envisages a complete exemption in respect of dividends declared by foreign subsidiaries of US companies. This is intended to incentivize repatriation of earnings into the US, which is expected to boost investment and consumption. Overall, it is expected that this reform proposal would spur economic growth and increase overall tax collections.”
Tax consultants argue that there is a strong reason for a reduction. Abhishek Goenka of PricewaterhouseCoopers said, “There is a clear case to reduce the headline rate of tax in India. There are several imperatives to this. First, the government has itself laid down a four-year roadmap towards a 25 per cent rate. Second, with incentives and exemptions mostly phased out, there is a clear case to reduce the headline rate. Additionally, with the global developments, there will be added pressure.”
