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Recent Tax concessions is the biggest fraud in our Financial history. The average rate of Tax paid by the corporate sector is around 22%. Most companies don't have taxable Profits because of the huge difference in depreciation allowed by Tax laws and that claimed in books
In the quest for additional revenues, MAT was introduced. Here Companies pay Tax on book Profits which can be set off against future earnings. In a company which is constantly expanding this will never happen and they will always have a MAT surplus
In any case the new Taxes would not have made any difference to such Companies but the idea of denying the new Rates to such Companies is both perverse and will send out a bad signal- much as the Surcharge on FPI's did
If the objective was to make more cash available in the hands of Capital intensive companies which create the most jobs, this is a non starter. The only Companies which will benefit will be the likes of Banks, FMCG and service companies which do not add much employment
And it's a lie that this will cost the Govt 1.45 lac crores. I doubt it will cost even 30k crores. The question is that has the FM and her band of merry men studied this or have they shot from the hip as they did on the LTCG Surcharge. I suspect it is the latter
Can we really afford to have a minister and Bureaucrats who are so blind to what they do and how badly it damages sentiment? Unless they reverse their stand on MAT, we will see the recent euphoria evaporate and the Market resume it's downward momentum with even more force
What is even worse is the impression that it sends down the line that we have a bunch of clueless people in our Finance Ministry. I hope the PM takes urgent action to bring Professionalism into one of our most important ministries
It would have been far better to reduce individual Tax Rates by 10%. Lower rates would have improved compliance and put money in the hands of consumers which would have increased demand and benefited the Corporate sector. A great opportunity lost
The total target for direct tax collections is 14 lac crores. Of that the Corporate sector share is some 6 lac crores. Even if every single Corporate got a 10% benefit, it would cost 60k crores. But the largest ones like Reliance, ONGC, Hindalco etc will get nothing
Companies below 200cr were in any case paying 25% so the benefit is only 5%. At the most this benefit will apply to only 2 lac crores of income and the cost will be only 20k crores. Wonder how they came up with a cost of 1.45 lac crores.
