• UGI USER
  • Sep 04, 2024
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IMPACT OF CORPORATE TAX CUTS ON WAGES

Why in the news?

Recent evaluations reveal that corporate tax cuts in the U.S. and India led to minimal wage increases and significant revenue losses, shifting the tax burden to individuals.

IMPACT OF CORPORATE TAX CUTS ON WAGES - UPSCsource:TH

India’s Corporate Tax Cuts:

  • Tax Reduction: In September 2019, India reduced corporate tax rates for existing companies from 30% to 22% and for new companies from 25% to 15%.
  • Revenue Loss: This resulted in a tax revenue loss of approximately ₹1 lakh crore in 2020-21.
  • Employment Trends: Although employment and labour force participation increased, corporate tax cuts had limited effect on job security and wages. Unpaid family work and insecure jobs increased.
What is Corporate tax?

  • Definition: Corporate tax is a direct tax levied on the net income or profit of public and private companies registered under the Companies Act 1956.
  • Applicability: Imposed on both domestic and international companies, calculated by subtracting allowable expenses from total revenue.

Significance:

  • Revenue Source: Funds public goods and services like schools, hospitals, and infrastructure.
  • Wealth Redistribution: Addresses income inequality by taxing more profitable corporations.
  • Economic Impact: Affects business competitiveness and investment attractiveness, influencing business location and investment decisions.

Associated Article:

https://universalinstitutions.com/a-less-taxing-time/