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Friday, February 26, 2021

UKIBC seeks parity in corporate tax rates for Indian, foreign cos

As part of pre-Budget consultations with the Finance Minister, the UK-India Business Council also recommended raising the FDI limit in defence and insurance sectors.

By: ENS Economic Bureau | New Delhi |
January 17, 2021 1:15:27 am
UK-India Business Council, UKIBC, corporate tax, pre-Budget recommendations, Nirmala Sitharaman, economy news, Indian express newsUnder the new regime, an individual is required to pay a 10 per cent tax for income between Rs 5 lakh and Rs 7.5 lakh, and 15 per cent for income between Rs 7.5 lakh and Rs 10 lakh against the existing rate of 20 per cent in the old regime.

The UK-India Business Council (UKIBC) has urged the government here to bring parity between corporate tax rates for domestic and foreign companies as part of its pre-Budget recommendations submitted to Finance Minister Nirmala Sitharaman.

“Globally, the general practice is to have a tax rate parity across all kinds of companies within the same industry. Examples are all BRIC countries except India and a majority of OECD countries (UK, Japan, etc.) as well as important financial centres like Hong Kong & Singapore where the tax structures for domestic and overseas companies are identical,” said Jayant Krishna, group CEO, UKIBC.

The reduction in the corporate tax rate for domestic companies coupled with the abolition of dividend distribution tax (DDT) creates a significant disparity between the effective tax rates applicable to foreign companies and domestic companies at 43.68 per cent and 25.17 per cent, respectively. The Union Budget for 2021-22 will be presented in Parliament on February 1.

Foreign banks generally operate in India as a branch due to regulatory and commercial reasons and a reduction in the corporate tax rate for such branches will provide a level playing field as compared to branches of domestic banks and encourage investment by foreign entities that are keen to invest in India through a branch route, Krishna said.

UKIBC’s group chair Richard Heald, OBE, has urged the government to further accelerate the pace of economic reforms through Budget announcements which would eventually lead to enhanced investment and trade footprint of UK’s businesses in India.

Apart from this, UKIBC also suggested the government to increase allocations for the defence sector to over 2.5 per cent of the GDP and raise foreign direct investment (FDI) limit through automatic route in the sector to 100 per cent from 74 per cent.

It has also recommended raising the FDI limit for the insurance sector to 100 per cent from 49 per cent along with asking for mutual recognition of degrees between India and major countries, including the UK, and removal of retrospective taxation, fast-tracking disinvestment of public sector undertakings, customs duty reduction for import of alcoholic spirits, and a regulatory regime for online gaming and sports betting.

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