Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.

There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Sunday, 30 April 2017

Everything Else being Equal


WHAT  ?


·         Last week , Donald Trump reduced Corporate Income Tax from 35 % to 15 % for American companies


·         Earlier , UK had announced reduction in Corporate Tax from 30 % to 20 % . Several EU countries are planning similar reductions


·         Closer at home , in his last budget , Shri Arun Jaitleyji had reduced Corporate Tax from 30 % to 25 % , for companies with annual revenues of less than Rs 50 crore


·         News reports say that the Finance Ministry is considering to extend this benefit to companies with revenues of less than Rs 500 crores , in the forthcoming budget



There is sufficient evidence to show that :


·         Lower tax rates lead to better tax compliance and higher , overall tax collections


·         Lower tax rates also result in expanding the tax-base ( of tax payers )



This phenomenon assumes significance in view of the following declaration by Shri Hasmukh Adhia , Union revenue Secretary , last Saturday :


“ Close to 9 lakh registered companies have not been filing annual returns with the Ministry of Corporate Affairs ( MCA ) and are a potential source of money laundering



Focus should be now on technology . There should be no need to call anybody a thief. The machine should itself catch the thieves “




WHY  ?


·         To attract investment ( both local as well as Foreign ) in  Mfg / Services / Infrastructure ( by enabling companies to plough back increased profits )


·         To generate jobs for millions of unemployed youth


·         To prevent companies from going abroad to make more profits in countries where tax rates are lower


·         To make companies globally competitive


·         To increase share of international trade by increasing exports



WISHFUL  THINKING  ?



Not entirely  !


But , by itself , lowering of Corporate tax is not a “ sufficient “ condition for achieving the five “ Objectives “ listed above


For sure , no company hires more number of people than it needs , just because it can now “ afford “ ( due to bigger profits ) !


If we are smarter than those other countries , we should link lower Corporate Tax liability with each “ ADDITIONAL UNIT OF NEW JOB CREATION “ , as explained in :



Incentivizing  Employment  ?  ( 24  Aug  2016  )





NEXT :


By “ Globally Competitive “ , I suppose , Economists ( - and Politicians ?  ), mean :



Creating a LOW COST ECONOMY



That is not going to happen just because of  “ LOW CORPORATE TAX “ !


It will happen only when we implement measures to facilitate  “  LOW INPUT COSTS  “


Inputs of all kinds as explained in :


·         Solar Power at Rs 1 per Kwh ?  ( 29  Jan  2017  )



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·         One Up on Donald Trump ?  ( 16  Dec  2016  )



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·         Automation is Inescapable   ( 30  Nov  2016  )



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·         How to break the Vicious  Circle  ?   (  03  July  2016  )



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·         Level  Playing  Field  ?   (  11  June  2016  )



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·         Back Factory of the World  ?   ( 09  Sept  2016  )



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·         Create  Wealth  to  Create  Jobs   (  26  Feb  2014  )


If there is a political will , India can beat the menace of “ Anti-Globalization / De-Globalization “ , by turning itself into a LOW  COST  ECONOMY


By itself , reducing Corporate Tax will not take us very far  !



   
01 May  2017




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