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Presenting an optimistic picture of the Union Budget 2017-18, senior Finance Ministry officials on Saturday expressed hope that the economy would grow by at least seven per cent next fiscal and also assured that corporate tax rates would decrease as the income tax base widens.
“Unless we increase our spread of personal income tax, unless we have more people coming forward and filing the exact detail of income, it’s a challenge for us. That’s what we are trying to do,” said Revenue Secretary Hasmukh Adhia while addressing a seminar at industry chamber Ficci.
Noting that there have been issues that our corporate tax rate is not globally competitive, he further said, “Particularly, we are comparing ourselves with China, not with the US. The US is 40 per cent, but we don’t do that. In comparison to China, it is said we should reduce it to 25 per cent.”
However, Budget constraints and the challenge is to raise the resources for the move.
The “most challenging” is to increase the share of the personal income tax in the total kitty.
“It is abysmally low. If you take the share of GDP, it is only coming to two per cent. This would probably be the lowest in the world. Just two per cent of the GDP from personal income tax receipts is very surprising,” Adhia said.
Finance Minister Arun Jaitley had in the Union Budget 2015-16 announced that the government would reduce the corporate tax rate to 25 per cent from the existing 30 per cent over the next four year period along with a phase out of exemptions.
However, despite expectations for some relief, he only reduced the corporate tax rate to 25 per cent for small and medium firms with an annual turnover of less than Rs 50 crore in the Budget presented last week. He had also cut the corporate tax rate to 25 per cent for new manufacturing units in the last year’s Budget.
Meanwhile, addressing the event, Economic Affairs Secretary Shaktikanta Das expressed confidence that the economy would grow at over 7 per cent next fiscal.
“For this year’s GDP growth, we have to wait till March—end. But next year, it will be upwards of 7 per cent,” he said.
He also stressed that the impact of demoentisation will not spill over into the next year.
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