Why did the Finance Ministry Cut Down Corporate Tax in India?

The channelling of taxable income to various investment plans is one of the most important tax planning goals. Tax Liability Reduction: As a taxpayer, you can save the most money on your tax bill by ensuring that your business is properly organised and operating under the law. A corporate tax, sometimes known as a corporation tax or a business tax, is a direct tax levied on the profits or capital of corporations or similar legal entities. Many countries levy such taxes at the national level, and a state or local level may levy a comparable tax. Now, we will look into the main topic, which is the aim of the abolishment of Corporate Tax in India. Also, what is the real Need for Lowering Corporate taxes in India? 

What is corporate tax? 

A corporate tax, sometimes known as a corporation tax or a business tax, is a direct tax levied on the profits or capital of corporations or similar legal entities. Many countries levy such taxes at the national level, and a state or local level may levy a comparable tax. The taxes are also known as income tax and capital tax. Corporations incorporated in the country, corporations doing business in the country on income earned, foreign corporations with a permanent establishment in the country, and corporations deemed to be resident for tax purposes in the country may all be subject to a country’s corporate tax. In most cases, the tax is levied on net earnings. The rules for taxing corporations and people may differ dramatically in certain jurisdictions. Certain types of corporate activity or entities may be tax-exempt. Evidence suggests that a portion of the corporate tax is paid by capital owners, employees, and shareholders, but the tax’s highest incidence remains unknown. Many countries levy such taxes at the national level, and a state or local level may levy a comparable tax. Now, we shall look into the aim of the abolishment of Corporate Tax in India. 

What is the aim of the abolishment of Corporate Tax in India?

The government lowered the effective corporate tax rate from 35% to 26% in September 2019, which, combined with fewer expenses owing to the epidemic, increased their bottom line to record levels in FY21, according to the report, which did not provide specific profit figures. India’s corporate tax rates have been lowered to promote investment and growth in the country’s ailing economy. The base corporation tax rate will be reduced from 30% to 22%, according to Finance Minister Nirmala Sitharaman. The unexpected action sparked a rally in the stock market, with the Sensex index rising 4.5 per cent. Policy interventions and big reforms will only create demand. The increase in factor payments that would have resulted from the government investing the Rs 1.45 lakh crore in deferred corporate tax in infrastructure would have encouraged demand and, in turn, grown the economy.

Corporate tax around the Globe list

The corporate tax around the globe list is very interesting. In 2021, twenty countries altered their statutory corporate income tax rates. Bangladesh, Argentina, and Gibraltar raised their highest business tax rates, while 17 countries, including Chile, Tunisia, and France, reduced their corporation tax rates.

The highest corporation tax rates in the world are in Comoros (50 per cent), Puerto Rico (37.5 per cent), and Suriname (36 per cent), while the lowest corporate tax rates are in Barbados (5.5 per cent), Uzbekistan (7.5 per cent), and Turkmenistan (8 per cent). A total of fifteen jurisdictions have no corporate tax. Based on statistics from 180 jurisdictions, the global average statutory corporate income tax rate is 23.54 per cent. The average statutory rate is 25.44 per cent when weighted by GDP. Asia has the lowest regional average statutory rate of 19.62 per cent, while Africa has the highest rate of 27.97 per cent. However, when GDP is weighted, Europe has the lowest regional average rate (23.97%), and South America has the highest (31.03%). In the EU27, the average top corporation rate is 21.30 per cent, 23.04 per cent in the OECD, and 69 per cent in the G7. Since 1980, the global average statutory corporate tax rate has steadily declined, with the largest drop in the early 2000s. Since 1980, every region has decreased the average statutory corporate tax rate.

Conclusion:

In the above article, we learned about corporate tax and the aim of the abolishment of Corporate Tax in India. A corporate tax, sometimes known as a corporation tax or a business tax, is a direct tax levied on the profits or capital of corporations or similar legal entities. India’s corporate tax rates have been lowered to promote investment and growth in the country’s ailing economy. The unexpected action sparked a rally in the stock market, with the Sensex index rising 4.5 per cent. Also, we learned about Corporate Tax around the Globe list. 

In 2021, twenty countries altered their statutory corporate income tax rates. Bangladesh, Argentina, and Gibraltar raised their highest business tax rates, while 17 countries, including Chile, Tunisia, and France, reduced their corporation tax rates.