India cuts tax

NEW DELHI  India announced Saturday a cut in corporate taxes and other initiatives for a more stable and predictable tax regime in a bid to woo foreign investors and spur faster growth in Asia’s third biggest economy.

Finance Minister Arun Jaitley unveiled his right-wing government’s first full budget after storming to power at last year’s general elections on a pledge to reform and revive the economy.

In a bid to win over investors disappointed by last year’s interim budget, Jaitley said the corporate rate would be cut from 30% to 25% over four years starting next year.

The minister pledged to make fairer a regime long criticised as being aggressive, arbitrary and holding back investment.

The moves are aimed at encouraging foreign companies to set up shop in India, and attracting overseas investment for roads, railways, ports, power plants and other dilapidated infrastructure.

“This will lead to a higher level of investment, higher level of growth and more jobs,” Jaitley told the parliament.

India’s tax authorities have locked horns with a string of international companies including Royal Dutch Shell and IBM.

British mobile giant Vodafone is currently embroiled in a bitter, USD2.4-billion battle with authorities, while Finnish company Nokia had a plant in India seized over a tax dispute.

Jaitley deferred to 2017 the introduction of controversial rules seeking to curb tax evasion that were first announced by the left-leaning former administration.

The General Anti-Avoidance Rules (GAAR) seek to prevent companies from routing transactions through other countries to avoid tax, but were seen as a money-grabbing move.

Jaitley also said a long-awaited goods and services tax (GST), which seeks to help businesses by harmonising a web of state-based duties and taxes, would be introduced in April 2016.

The GST bill was tabled in parliament in December, but has yet to pass the upper house, where the ruling party lacks a majority.

Jaitley also said customs duties would be dumped on 22 items such as raw materials and components, seeking to help local manufacturers.

A wealth tax would also be abolished and replaced with a two percent surcharge on the super rich, a move Jaitley said would add 90 billion rupees (USD1.4 billion) to government coffers.

KGMP analyst Arvind Mahajan welcomed the moves, saying the government “has laid ground for a competitive and predictable tax regime which is less adversarial”.

sourced:ttrweekly.com