No reduction of corporate tax – FM

By Vijay Kumar

The Finance Minister, Mr. P. Chidambaram, has ruled out any reduction in the scheduled rate of corporate taxation “as the effective tax rate in India was 19.2%. In no Asian or ASEAN country is the effective rate less than 19%,” he said, even as he sought the cooperation of industry in moderating inflation and “not allowing short-term lure of profit-making cloud its thinking, as long term price stability was fundamental for overall stability of the economy.”

Speaking at the National Conference of Union Budget 2007-08, organized by FICCI yesterday, Mr. Chidambaram said of the current effective rate of taxation, Fringe Benefit Tax accounted for just 1%. He informed captains of industry that the method of calculation of tax on ESOPS, as fringe benefit, would be worked out soon.

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++ “We are prepared to consider whether this benefit should be taxed at the hands of a company or an individual, for which, industry’s view would be ascertained.”

++ taxing of ESOPS would not affect a company’s ability to hire talent, as the proposed tax would apply across-the-board to all companies.

++ There is no reason for the corporate sector to “feel poor and deprived” as this sector yields the bulk of tax revenue. For instance, the corporate sector paid advance tax of Rs 60, 000 crore in 2003-04, Rs 73,000 crore in 2004-05, Rs 84,000 crore in 2005-06 and Rs 75,000 crore in three installments in 2006-07.

++ I am confident that 2007-08 will be another year of good corporate performance and there is every reason to believe that the first objective of the current budget – to ensure that India’s growth story remains in tact – will be met.

v we all have to put not just our heads together but also bring our hearts together and come up with innovative schemes that will benefit 115 million farming families