The United States Senate passed the GOP tax bill with 51-49 votes slashing corporate tax. Pressure can mount on India in the upcoming budget session to reduce taxes in corporate sector.
US Senate Passes GOP Tax Bill Reducing Corporate Taxes
The Republicans in the senate exchanged heated arguments during their debate on corporate tax bill. Later the bill was passed by 51-49 majority giving the Trump administration a taste of success that wants to finalize the bill by the end of 2017 giving them a major success after an year completion in the White House.
The new bill has reduced corporate tax by 15% making it to 20% from earlier 35%. Many experts believe that this is a very big step and it will further boost the already growing US economy. President Trump has already tweeted about it the following morning.
The major reason behind reducing the tax rates was to stop the shifting of corporate from US resulting in job loss. Many big businesses have shifted from USA to China because of high tax rates and Donald Trump made this a big issue in the presidential elections last year.
We are one step closer to delivering MASSIVE tax cuts for working families across America. Special thanks to @SenateMajLdr Mitch McConnell and Chairman @SenOrrinHatch for shepherding our bill through the Senate. Look forward to signing a final bill before Christmas! pic.twitter.com/gmWTny3SfS
— Donald J. Trump (@realDonaldTrump) December 2, 2017
India Under Pressure to Reduce Corporate Tax
The Indian government has taken some good steps in improving business conditions in India. The 100th rank in ease of doing business was one such example. Given the global competition, India has to do lot more in making the nation a business destination.
The Government has recently set up a task force to draft a new direct tax code. The earlier tax code of 2010 lapsed after the dissolution of Lok Sabha and after the GST experience government does not want to pick up the old code. Although the new code will not be coming before 2019 elections due to political reasons but surely an achievable item if the Modi government repeats its term. The government is aiming to bring some structural changes in direct taxes. It may consider making the law simpler for both individuals and businesses. FM Arun Jaitley had already promised to reduce corporate taxes to 25% in 5 years for all corporates.
The Central Government constitutes a Task Force for drafting a New Direct Tax Legislation; For details, please Log on : https://t.co/2NxI52scYf
— Ministry of Finance (@FinMinIndia) November 22, 2017
India presently has a 30% corporate tax with additional cess and surcharge. This Fiscal year the government gave some relief for the corporates with turnover less than 50 crores by slashing corporate tax rate to 25%. This is one step towards Modi government’s corporate tax relief promised in first budget but there is a lot do.
India’s major competitor China has a corporate tax rate of 25% in general while some corporates have 15% tax rates given encouragement by the Chinese Government. To improve this, the Indian government should definitely take the right step further to attract businesses in India. This might be another reason
China’s policy on business is quite better than that of India and that is why major businesses land up in China rather than India. For being a $5 trillion economy by 2024 India should go for a major reform in corporate sector and that can come by a simplified and reduced corporate tax in the upcoming budget.