Corporate Tax Cuts: Economic Impact and Fiscal Challenges

Current Affairs National

Posted by newadmin on 2025-02-26 08:56:16 |

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The Parliamentary Standing Committee on Finance met on February 24, 2025, to evaluate the impact of corporate tax cuts introduced in 2019. With the Union Budget under review ahead of the parliamentary session reconvening on March 10, the committee questioned government officials on whether these tax cuts successfully stimulated private investment.

India's corporate tax cuts, introduced in September 2019, were intended to drive economic growth by encouraging private sector investment. However, the move resulted in a significant revenue loss of approximately ₹1.84 lakh crore in the first two years. As the government navigates potential revenue shortfalls from these tax cuts and income tax rebates, fiscal challenges have intensified, especially considering India’s already high debt-to-GDP ratio. Discussions during the meeting focused on strategies to balance fiscal responsibility with the need to promote economic growth.

Corporate tax serves as a critical revenue source for the government, funding essential public services and contributing to wealth redistribution. The tax rate plays a key role in shaping business competitiveness and investment decisions. While a high corporate tax rate can deter foreign investment, a lower rate may attract businesses but reduce government revenue.

The committee's inquiry underscores the importance of a thorough assessment of tax policies. Future fiscal strategies must take into account both immediate economic impacts and long-term sustainability. Policymakers face the challenge of fostering investment while ensuring the government maintains sufficient revenue to meet its obligations.

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