Bid to speed up corporate tax reform

The government may cut the corporate tax rate to 25 per cent from the current 30 per cent well ahead of its previously announced deadline as part of a package of tax reforms.

“The road map for phasing out of exemptions will be unveiled soon”, Adhia told reporters here.

When asked whether the 5 percentage point reduction in corporate tax rate to 25% promised by finance minister Arun Jaitley in his 2015-16 Budget could happen before the end of the four-year transition period given the need to stimulate corporate investments, Adhia said it could happen “ïn three or four years”.

However, any hopes of repealing a retrospective amendment to the Income Tax Act, the main cause of tax rows with the companies, have nearly been dashed, with the ministry saying the recently formed R V Easwar panel would not look into the amendment.

On whether the government would consider such an option, he said Vodafone had invoked an arbitration and “we have responded to it. And if there is an offer for out-of-court settlement, the government will consider it”.

Vodafone had named Yves Fortier of Canada as its nominee on the arbitration panel, which was to also have a nominee from the government and an independent member. The British telecom major is locked in Rs 20,000-crore tax dispute with Indian authorities over the alleged non-payment of capital gains tax on sale of Indian assets by Hong Kong-based Hutchison to Vodafone.

Following this, the government decided not to challenge the verdict in the Supreme Court. However, in May 2015, Lahoti recused himself.

In order to tackle such tax issues, the government is working on a separate roadmap for out of court settlement of litigation matters. According to government data, revenue foregone in the form of incentives and tax exemptions to corporates in 2014-15 grew almost 8 per cent year-on-year to over Rs 62,398 crore.

The Finance Ministry may also look at revising upwards the threshold for an appeal before the income tax appellate tribunal.