The Congress on Tuesday questioned the Narendra Modi government over the corporate tax cut that led to a revenue loss of ₹1.84 lakh crore to the public exchequer as per the Parliamentary Estimates Committee report and asked why the middle class was charged at peak tax rate of 30% against 22% for the corporates.
The Parliamentary Estimates Committee is headed by BJP and 12 out of the 16 members also belong to the ruling party.
Congress spokesperson Gourav Vallabh at a press conference at the party’s headquarters in Delhi said that for the last three years the government had repeatedly claimed that the corporate tax cut would help increase the tax collection.
“But the Parliamentary Estimates Committee 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 ₹1.84 lakh crore,” Mr. Vallabh said.
The government introduced the tax cut in September 2019, just two before the “Howdy Modi” in Houston, U.S. The rate cuts, Mr. Vallabh said, had come in the same month 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.
The government’s claim, Mr. Vallabh, said about increasing the collections has also fallen flat. “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% increase in net profits in FY21 over FY20.
“In FY22, listed companies alone made profits that grew by 66.2% over FY21. As per the SBI research paper, the corporate tax cut contributed 19% to the top line for FY21. So the corporate tax cut contributed to the increase in corporate profits but didn’t raise corporate tax collections,” he added.
The other argument that the money saved on taxes was re-routed as capital expenditure is also wrong, Mr. Vallabh said, because in the financial year 2021-22 the capital expenditure grew by a mere 2.3%, a six-year low. “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,” he observed.
Mr. Vallabh said that it is astounding that amidst the pandemic, the government rather than increasing the MNREGA budget is extending tax cuts for the corporate world.
He asked, “Why does this government show benevolence only for the corporates and step-motherly treatment for the middle class? Why are such rate cuts limited to corporates, why the middle class is taxed at a peak income tax rate of 30% [that too without setting off the expenses] and corporates at 15% or 22%?”
If a similar cut was offered to the middle class, he asserted, consumption would have increased directly increasing employment opportunities.
