PHDCCI chief bats for flat 20% corporate tax rate

The Centre should look at introducing a flat 20 per cent corporate tax rate, the new PHDCCI President Anil Khaitan has suggested.

The corporate tax rate could be brought to this level while removing all incentives and deductions, Khaitan told BusinessLine in an interview.

Khaitan, who assumed charge as PHDCCI chief recently, said the caste system among corporates needed to be “obliterated from the government's mindset”.

They should simply bring down the corporate tax rate to 20 per cent, keep the maximum individual tax rate at 25 per cent by removing all incentives and exemptions, Khaitan said.

“When Donald Trump is bringing the corporate tax rate down to 15 per cent for American companies, why can’t India take a step and do it. Reducing the tax rate will also improve tax administration and boost collections,” he added.

Khaitan felt that India needed one more “dream budget”, like the 1997 one presented by former Finance Minister P Chidambaram.

Also, more reforms are needed, especially on the labour front and judicial reforms.

Khaitan does not see private investments coming back for the next 18 months. “Private investments are not coming back because banks are not financing and sentiment is low,” he said.

Also, the private sector is already faced with low capacity utilisation in many sectors due to which they will not be looking to add new capacities. Economic growth will come only when the government becomes a facilitator and industry is allowed to do its bit in services, manufacturing and agriculture, he said. “They (Narendra Modi government) should now implement what was assured in 2014 — Minimum Government and Maximum Governance,” Khaitan said.

To establish a factory in India, one still needs 31 permissions, and for a power facility, as many as 51 permissions are needed. “We really require a single window with no multiple windows behind that,” he said.

On corruption, Khaitan said there was no corruption at the top because of the Prime Minister. However, corruption has zoomed down to the bottom level of the bureaucracy. “Corruption has increased at the lower level — any State administration or tax administration. It is huge and humungous,” he added.

Khaitan said there was a strong case for urgent labour reforms. He said the Centre was already doing it — looking to merge about 44 laws into four codes. While the Code on Wages is already before Parliament, there is yet to be progress on the Codes on Industrial Relations, Social Security and Safety.

Khaitan also called for ‘re-writing of the proposed labour code on wages. “For the Code on Wages, they have just combined four Acts without reviewing the clauses,” he added.

Khaitan expressed hope that the Centre and the States would eventually move into a two-rate structure of 5 and 18 per cent. “Ever since July 1, there has only been confusion in GST. Only in the recent Guwahati meeting of the GST Council, some good decisions were taken,” he said.

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