“Was it a mandatory condition for going to the US?”, the Congress raised questions.
Addressing a press conference here on Tuesday, party spokesperson Gaurav Vallabh said, “Revenue loss of Rs 1.84 lakh crore in first two years of Corporate Tax Cut as on September 20, 2019, the government announced the corporate tax cut from a base rate of 30 per cent to 22 per cent for existing firms without exemptions/incentives and from 18 per cent to 15 per cent for new manufacturing units.
“This announcement was made exactly two days before the ‘Howdy Modi’ event organised on September 22, 2019 in Houston, the US. The rate cut came amidst fiscal distress as in the same month the Finance Minister had told states at Goa’s GST Council meeting that the Centre had no money and wouldn’t be paying the GST Compensation anymore,” he alleged.
The Congress said, “For the last three years, the government had repeatedly claimed that the Corporate Tax Cut would help increase corporate tax collection. But the parliamentary Committee on Estimates put out different claims in its report submitted on August 8, 2022. The panel said the corporate tax cut of 2019 had resulted in a negative ‘revenue impact’ of Rs 1.84 lakh crore.
“Why are such rate cuts limited to Corporates, why the middle class is taxed at a peak income tax rate of 30 per cent (that too without setting off the expenses) and Corporates at 15 per cent or 22 per cent? ”
“FY20 Revenue loss of Rs 87,835.75 crore and FY21 Revenue loss of Rs 96,399.74 crore.
“Corporate tax is paid on corporate profits after accounting for all expenses. As per CMIE, 30,000 companies (5,000 listed and 25,000 unlisted) made a 138 per cent increase in net profits in FY21 over FY20. In FY22, listed companies alone made profits that grew by 66.2 per cent over FY21.
He said as per the SBI research paper, the corporate tax cut contributed 19 per cent to the top line for FY 21. So the corporate tax cut contributed to the increase in corporate profits but didn’t raise corporate tax collections and as per RBI, the corporate tax cut has been utilised by companies in debt servicing, build-up of cash balances and other current assets rather than restarting the CAPEX cycle. In fact, in FY22 capital expenditure grew by a mere 2.3 per cent, a six-year low. So, there was no investment or job creation due to the corporate tax cut in India, and above this, corporate tax collection fell from Rs 5,56,876 crore in FY20 (actual) to Rs 4,57,719 crore in FY21 (actual) despite the increase in corporate profits.
Tax cuts for the rich lead to higher income inequality in both the short- and medium-term. In contrast, such reforms do not significantly affect economic growth or unemployment, the Congress said.