New Delhi, Dec 21 : Referring to corporate tax cuts in the 90s and also in 2005 during the UPA government, Finance Minister Nirmala Sitharaman on Wednesday rebutted the opposition claim that the government was giving bonanza to large corporates by reducing the tax rate. Sitharaman said that in 1994, under Dr. Manmohan Singh as Finance Minsiter, the corporate tax was cut to 40 per cent from the then prevailing 45 per cent. Subsequently, in 1997, corporate tax was brought down to 35 per cent from 40 per cent after abolishing the surcharge also.
“Then, from 2000 onwards, surcharges were back, raising the total corporate tax again to about 36-38 per cent which continued for the next five years after that. But, then, it was Mr. Chidambaram again, who reduced the corporate tax to 30 per cent in 2005, although along with the surcharge, the actual rate was about 33 per cent. Were they also bonanza to corporates?” said the Minister while replying to members on the discussion on Supplementary Demands for Grants (2022-2023) and Demands for Excess Grants (2019-2020) in Rajya Sabha.
In a bid to push private investment and domestic manufacturing, the Centre had in September 2019 slashed corporate tax to 25.17 per cent. For new manufacturing firms, the applicable tax rate was brought down to 17 per cent.
, making it the lowest in South East Asia.
The Minister noted that post 2014 the government has been focussing on making banks healthier, getting the economy to come back after being fragile in five situations and resolving the twin balance-sheet problems where companies were laden with debt.
She further said that cutting down the corporate tax was only following some of those measures which were important for business to grow in India. Citing investment announcements by automaker Mahindra Group and a large cement manufacturer, Sitharaman said that private sector capex was taking place as a result of favourable government policy such as production-linked incentive (PLI). “The PLI is seeing an absolutely robust response from the industry. Fourteen sectors have been given PLI and that is drawing a lot of investments to come into the country,” the Minister said.
Referring to former Finance Minister P Chidambaram’s suggestion of ‘Borrow and spend and even print money to reboot the economy’ during Covid time, Sitharaman said that the countries which followed this approach are suffering from its negative effects.
