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How does India’s corporate tax compare with other countries and why is it so high?
Corporate Tax to GDP percentage is the ratio of total corporate tax collections against the Gross Domestic Product of the country. When the percentage of corporate tax collections grows at a rate lower than the percentage of growth in GDP then this ratio decreases and vice versa. Thus this ratio is used to measure the efficiency of corporate tax collections.
In budget 2015, Finance Minister, Arun Jaitley put forth a proposal to reduce the Corporate Tax rate from the present 30% to 25% over the next 4 years. The reason provided for this by the Finance Minister was that India’s basic corporate tax rate at 30% is higher than the rates prevailing in other Asian countries and this makes our domestic industries uncompetitive. The Swarajya Research Team compiled a list of the existing corporate tax rates of various countries and compared the same with the rates of India.
Here we present to you the data of the top 5 and bottom 5 countries having the highest & lowest corporate tax rates:
The reasons for India’s low Corporate Tax to GDP ratio despite its high corporate tax rate are leakages from tax collections, failure to capture various economic activities under tax net, extravagant concessions and tax holidays. It could also be due to the fact that majority of our economic & productive activities are concentrated in the unorganised sectors.
Will the Finance Minister’s proposal to reduce Corporate Tax rate and withdraw exemptions & undue tax holidays, improve our Corporate Tax to GDP ratio? Keep watching our stats column.
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