Companies hire people, create products and services and help generate wealth for their shareholders. Without being able to invest, company growth sloww
Continuing in the theme of lack of ownership of income. [Read: Part 1]
Let me give you an example from the world of business. Let us say a mid-sized services company with a turnover of Rs 350 crore makes a 15% pre-tax profit, or about Rs 50 crore. On this profit it has to pay 35% corporate tax and an additional 2% CSR (corporate social responsibility) tax. The after-tax profit shrinks to Rs 32 crore. Most companies lose about 3% of their revenues from customer defaults. That further shrinks their profits.
Company’s growth is hampered
The company has very little left over to invest in research and development. When companies across the country are unable to invest in their businesses, the overall effect is a slow economy and the country suffers as a result. High taxes are a chain that imprisons the economy.
In the US, corporate tax has now been reduced to 21% – as compared to the 35% + 2% we have in India for companies with a turnover of greater than Rs 250 crore. (For the rest, it is at 30% + 2% – according to the latest Budget.)
Companies hire people, create products and services and help generate wealth for their shareholders. As the RBI governor Urjit Patel put it so eloquently recently, capital in India is taxed five times — corporate tax on companies, dividend distribution tax, tax for dividend income above Rs 10 lakh, securities transaction tax and capital gains tax. In his words, “[These taxes] would obviously also have an impact on investments and savings decisions.”
Thus, in both earning and spending, government through its taxation reduces the ownership we have on the income we earn from our labour and inventiveness.
Indians need to reclaim ownership on their income.