Comments
The Government is committed to reducing the corporate tax rates. In the latest Budget the benefit of the reduced rate of 25 per cent corporate tax was extended to companies with turnover up to ₹250 crore in FY2016-17.
About seven lakh companies filed their returns. Of these, about 7,000 declared incomes and showed turnover above ₹250 crore. These 7,000 will remain in the 30 per cent tax slab. The balance 99 per cent of the companies will be taxed at 25 per cent. The measure is expected to leave these companies with higher investible surplus which in turn will create more jobs.
All categories of taxpayers listed in the table will pay a basic income tax of 30 per cent if income exceeds ₹10 lakh. About 11.83 lakh firms will continue to pay 30 per cent tax whatever the turnover. There is no change in the rate of tax for firms. Thus, the finance minister has ensured that the bulk of companies will enjoy a preferential status of 25 per cent of tax while firms will not have the benefit. Is this not discriminatory?
Even with regard to the favoured companies, we can see a disincentive to growth. They will always try to remain small and medium enterprises and never cross the threshold turnover of ₹250 crore. Giving a tax break to small folks may sound good but can have the unintended consequence of a competitive disadvantage for the preferred categories.
The persistence with discriminatory tax treatment can mean shifting of the non-corporate enterprises into corporate entities. Is this a desirable goal for the growth of business in all sectors? No doubt, firms are not complaining.
Nani Palkhiwala narrates the story of a monk who belonged to an order where no one was allowed to complain even in the most trying circumstances. He once found a mouse in his mug of beer and was at his wit’s end trying to let his predicament be known without committing a breach of discipline. He called the Father Superior and, pointing to his neighbour, said, “Father, there is no mouse in my brother’s mug of beer”! This is the spirit in which the overtaxed non-corporate sector has to deal with the proposal to reduce corporate tax rate.
Business entities require to be treated with equal care and consideration. The contribution of firms either to revenue or for job creation cannot be underestimated.
Ramanujam is a former Chief Commissioner of Income-Tax, and Sangeetha is a Chennai-based advocate
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.