NEW DELHI: Even as the finance ministers of Group Seven (G7) countries come out in support of the US proposal for a 15 per cent global minimum corporate tax rate, will it make any difference to developing countries like India, which have used tax as a key tool to attract investment?
Experts say, if a consensus is reached on 15 per cent minimum corporate tax rate, India will not be impacted by it for now, but it may take away its room for manoeuver in future.
India currently has the lowest corporate tax rate of 15 per cent for new manufacturing companies.
However, after including surcharge (10 per cent) and Cess (4 per cent), the effective tax rate comes to 17.16 per cent.
For other corporates, the tax rate is 22 per cent. Mukesh Butani, managing partner, BMR Legal, does not think a minimum rate of 15 per cent would impact India as of now.
“Even if one looks at our lowest corporate tax rate for new manufacturing, India is fine,” says Butani.
Sudhir Kapadia, national tax leader, EY India, feels that the announcement of a minimum corporate tax rate of 15 per cent is path-breaking, especially for large and developing countries like India who would always find it very difficult to keep corporate tax rates artificially lower in a bid to increase much-needed foreign direct investments in the country.
What should worry Indian policymakers is the fact that the US treasury department has hinted at pushing the 15 per cent floor rate higher.
The secretary of US treasury had earlier proposed a 21 per cent minimum tax rate. In that case, the impact will have to be assessed since the US has a complex way of computing effective tax rate.