FM does not cede to industry demand for lowering corporate tax

New Delhi, Mar 5 (UNI) Not ceding to industry's demand, Finance Minister P Chidambaram today ruled out reduction in the scheduled rate of corporate tax, saying that the effective rate of corporate tax was 19.2 per cent -- lower than any other Asian country.

"In no Asian or ASEAN country is the effective rate of corporate tax as low as 19 per cent", Mr Chidambaram said in his address and the Question-Answer Session that followed with members of FICCI.

The Finance Minister said there was a need to phase out exemptions, which consequentially will raise the effective rate of taxation. But this was an extremly ticklish task as each exmeption has a history, a patron, a forefather and significant vested interest which would not want it to be abolished.

A forceful plea was made by some captains of industry to bring down the level of corporate tax and revert to the earlier level of dividend distribution tax of 15 per cent, but the Finance Minister was vehoment not to do so.

Infact, he asked the industry and businesses to appreciate that he had abolished surcharge on units with a turnover of less than Rs one crore. This would result in 12 lakh assessees going out of the tax net.

The Finance Minister sought cooperation of the 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." Mr Chidambaram said Fringe Benefit Tax accounted for just one per cent of the current rate of corporate taxation.

He informed that the method of calculation of tax on Employees Stock Optionsts (ESOPs), as fringe benefit, would be worked out soon.

"We are prepared to consider whether this benefit should be taxed at the hands of a company or an individual," he said in reply to a question in this regard.

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