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Finance Minister Arun Jaitley on Thursday said tax rates can be reduced only with greater formalisation of the economy and expansion of the tax base.
“Rationalisation of tax rates in a non-compliant society is challenging,” he said at the annual general meeting of FICCI, when asked to comment on how nations globally are moving to low tax regimes. The US proposes to lower its corporate tax rate to about 21 per cent.
Jaitley noted that in India, the direct tax rate for companies has come down to 5 per cent while the indirect tax (under the composition scheme of GST) is as low as 1 per cent. “These are all efforts to nudge a non-compliant society into paying tax,” he said.
His comments come ahead of Union Budget 2018, where India Inc is hoping the government will lower tax rates for larger companies as well to the promised 25 per cent from the current 30 per cent.
Meanwhile, Jaitley also listed the Cenre’s key priorities for 2018, including strengthening of public sector banks, infrastructure creation and disinvestment.
“Next year, our thrust would be on strengthening of public sector banks, focus on their recapitalisation to increase their capital adequacy and credit giving capacity among others,” he said. Only if their lending capacity increases, PSBs will be able to strengthen MSMEs and boost the economy, he added.
Infra creationHe also emphasised the need to continue the momentum on infrastructure creation and expedite investment in railways to propel the economy.
Noting that the country saw more structural changes in 2017 than any time in the recent past, Jaitley said the government will also continue with its agenda of structural reforms, as it now has more popular support.
Exuding confidence that the government will exceed the disinvestment target for the fiscal, the Minister stressed that the proposed stake sale of national carrier Air India is on track. “The disinvestment of Air India is moving expeditiously. We have appointed advisors for the sale, and will soon come out with the next step,” he said.
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