Budget 2018: US President Donald Trump must be a happy man at present. As Apple Inc. is paying $38 billion in corporate tax to the US government. Apple Inc said it will bring hundreds of billions of overseas dollars back to the US, pay about $38 billion in taxes on the money and spend tens of billions on domestic jobs, manufacturing and data centers in the coming years. In addition, the iPhone maker plans capital expenditures of $30 billion in the US over five years and create 20,000 new jobs at existing sites and a new campus it intends to open, Bloomberg reported the Cupertino, California-based company as saying in an official statement.
It shows how corporate tax cut in Budget 2018 can actually boost businesses and add more revenue to the government’s kitty. As Budget 2018 nears, corporates in India are once again demanding Finance Minister Arun Jaitley to cut tax rates. Top banker Uday Kotak, too, has backed this demand. “I am a believer that as you reduce rates, income goes up for the government, and therefore, reduction in corporate tax is a little boost to animal spirits,” Uday Kotak said in an interview with CNBC-TV18.
However, Finance Minister Arun Jaitley will be under pressure to moderate tax rate for the industry in Budget 2018. With the US substantially cutting corporate tax, the minister will also need to keep India’s tax rate globally competitive. In his Union Budget speech of 2015-16, Jaitley had said “a regime of exemptions has led to pressure groups, litigation, and loss of revenue. It also gives room for avoidable discretion. I, therefore, propose to reduce the rate of corporate tax from 30 percent to 25 percent over the next four years. This will lead to higher level of investment, higher growth, and more jobs.”
“I am hoping that in this Budget, they will bring down the tax rate to 28 percent at least to give a confidence that they are on that path,” Ficci’s new president Rashesh Shah said. He further said that tax cut in Budget 2018 would also help the Indian industry in meeting the challenges emanating from tax cuts by the Trump administration in the US and its aftermath in other developing countries.
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According to Deloitte India Partner Gokul Chaudhry, direct tax measures could contribute towards ‘Make in India’ and push growth. “This would involve a reduction in the corporate tax rate to 25 percent in Budget 2018 in line with the Finance Minister’s four-year-old announcement. In its December approval of the most extensive tax-code revisions since 1986, Congress scrapped the previous international tax system for corporations — an unusual arrangement that allowed companies to defer US income taxes on foreign earnings until they returned the income to the US. By switching to a new system that’s designed to focus on domestic economic activity. It would be interesting to see if Finance Minister Arun Jaitley reduces corporate tax in Budget 2018?