Commentary on 1st Budget of Mr. Arun Jaitley

How is blanket reduction of corporate tax by 5% justified?

India needs better distribution of wealth. In the name of development, is it justified to create few big private corporate houses and benefit its owners?. Consider the fact that, corporate tax is paid on profit making companies. An SME/ a new plant or a start up which add employment will not be making any profits / negligible profits in this financial year. So this cut in corporate tax does not benefit or create employment. It benefits corporate houses who are making lot of profit with 30% tax slab itself. They are making profit, that means they are already globally competitive with 30%. 22% of revenue is coming from corporate tax from few corporations (total size is in 1000s), while 9% is from m income tax (total size is in billion). This indicates how wealth is getting concentrated with few, who own these corporations. 70 billion is approx corporate tax. 5% discount means (70 x 0.05/0.30) 11 billion dollars, which is approximately 66,000 crores. Govt is handing back this money to corporates every year from now on. As per 80:20 rule, 80 percent of corporate tax must be payed by 20% of tax paying corporations, so the number if beneficiary is few hundreds. Note many foreign companies are not paying tax in the name of export oriented tags. Of the 20% tax paying may be a third are public sector companies. Govt is the owner, tax benefit gets nullified. So about 40,000 crores is dolled out to about 10% of the super rich and big companies. You will find HLL selling soaps, paste / ITC selling cigarates or soft drink companies in them. These companies are milking mature technology with optimised human resources (least man power). So how is this tax reduction justified? If intention of govt is correct, they must have been making more slabs. Govt must make it dis-encouraging to build super rich and big corporate houses, but distribute work among lot of small/medium enterprises. With more SME, wealth get distributed among more owners. They can always make groups to address size issues (like standardisation bodies or chamber of commerce). Big corporations are not really required. The total tax paying private corporates may just be < 1000. Is it that difficult to track trail of money for these 1000 entities? I do not see a reason in govt argument of difficulty in tracking corporates, but imposing complex tax structure on millions of its citizens. 1000 big corporates have all the resources to manage complexity and be compliant. So complex slab structure is required for corporates, while simplification is required for individuals. Govts do it reverse, so is the pyramid structure of wealth distribution.