India Consider Corporate Tax Cuts

August 14, 2009 Taxation in India  No comments

The Indian Government has proposed lowering corporate tax rates, abolishing equity trading tax and funding it all by improving tax compliance.

In an effort to raise net tax collection, the Indian government is proposing further changes to their taxation system. Spearheading the new bout of changes is the idea of lowering corporate tax rates to 25% from their current 30%. This would be the lowest corporate tax rate ever seen in India. Proposals of abolishing taxation on equity trades had also been floated. The changes are being introduced for the sole purpose of spurning on the Indian economy.

The funding for these tax cuts will come from increased efforts to improve taxation compliance, especially in personal taxation. Specific attention will be paid to expanding the tax payer base of India. Currently there are 27 million tax payers in India in a population of 1.2 billion. Stronger emphasis will also be placed on the punishment of tax shirkers, with fines and up to seven year prison terms.

At the announcement of this proposal Pranab Mukherjee, India’s Finance Minister, stated “The thrust of the code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base.”

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