Was Finance Minister right in reducing Corporate tax rate ?

Was Finance Minister right in reducing Corporate tax rate ?

Recently FM has reduced corporate tax rate and made it at par with many global economies . The step has been taken to counter economic slowdown . Many feel its incorrect and rather than this individual tax rate should have been reduced or tax on product reduced or interest rate reduced to augment consumption . Well these people can have their own logic but I support what FM has done .

Lets analyse both Corporate vs Individual cases .

I feel the one who takes risk , whose earnings are more transparent , who pays taxes should be rewarded first which is corporates here . The one whose survival is in growth and non growth is a concern should be rewarded first than the one whose major concern is survival and not growth and most importantly his( individual ) survival is dependent on growth of first ( corporate ).

A promoter takes risk on his capital, spends time and energy to build and develop a business and a employees enjoys the fruit of this growth . Yes employees do contribute for business growth but are paid salary , perks etc. They go on official tour , stay in good hotel , move by flight etc . Are they worried about the expenses which they are incurring ? No . Its being born by their employer company . So a employees lives and enjoys a good life at company’s cost and has no risk of company business failure . The only time he is worried when his salary gets reduced or retrenched from job . Who has got the first hit from the risk of business failure – corporate or its employee ? So who needs to be protected first ? If a company fails employees loses his job , if the company grows employees also grow in terms of salary etc . Also whose fortune is dependent on whom ?

Now coming to individual ( consumer ) . We all are individual so will always look for our benefit first . We want ourselves to be protected and rewarded because we feel all are paying tax .  But that’s not the reality . How many of individuals disclose their earnings correctly particularly those who are doing business, self employed , professional or even in private sector ? How many pay taxes correctly ? If a businessmen showing less earning , paying less tax why he should be rewarded for his purchase of big car by lower interest rate or lower tax . Has he contributed to the revenue of the country for which he should be given the benefit ?

It’s a reality that is I have to pay 10000 as EMI I will think twice for going for loan but if the same EMI becomes 4000 due to reduced interest rate then most Indians will try to take advantage of it . This will lead to more consumption , revival of growth and increase in inflation . That will force RBI to increase the interest rate and the EMI will get increased . So are we not going to end up a situation where people might have borrowed more than their paying capacity ( main reason for present slowdown ) , cases of default might creeps in and again entering into economic slowdown phase . Is it a long term solution ?

Reduced corporate tax makes India attractive investment market for foreign companies , competition will lead to better quality products  , competition will also lower the cost and lowering the cost means consumer will get at a lower price.

Yes I do agree that honest tax payer should be rewarded but that when I look at dishonest tax payers . Government already doing a lot to increase the tax base and there has been increase in tax revenue last few years. I am sure that individuals tax rate will also get reduced in coming years as felt by many but it’s a step by step process .