India should cut corporate tax, go for inheritance levy: OECD
India should bring down corporate tax rate to 25 per cent, introduce inheritance tax and provide certainty in rules, global think-tank OECD said on Tuesday, taking the line that demonetisation will benefit the economy in the long run.
In its Economic Survey of India, the OECD said comprehensive tax reforms, especially the goods and services tax, "would lift all boats" and raise revenue helping the government effectively deal with high poverty rate. Observing that poverty is still high despite growing prosperity, the survey suggested that living conditions across the states could be improved by focusing on farm output, urban infrastructure, liberalised product and labour market, reports PTI. "A comprehensive reform of property, personal income and corporate taxes is needed to complement the GST reform. It should aim at raising more revenue to fund social and physical infrastructure in a way that support economic growth, promote social justice and empower subnational governments to better respond to local needs," the survey said.
It recommended "gradual reduction in the corporate income tax from 30 per cent to 25 per cent while broadening the tax base and providing certainty regarding tax rules and their implementation". Among other things, it suggested eliminating tax expenditures that benefit the rich most and freezing of the income thresholds for levying taxes.
Noting that wealth in India is extremely concentrated, the OECD made a case for introduction of inheritance tax with a high exemption threshold and raising the scope for property tax. "There is also scope to raise more revenue by less distortive property taxes. Raising more revenue from recurrent property taxes would require granting municipalities more power to implement them and set tax rates, and establishing up-to-date property values," the OECD said.
The government plans an ambitious base-broadening and rate-reducing tax reform under which the tax rate for resident companies will be lowered to 25 per cent over 5 years till March 2021. It said demonetisation complements many initiatives recently taken by the government to fight corruption, blackmoney and reduce tax evasion.