Wednesday, October 16, 2019
Follow us on
BREAKING NEWS
जयपुरः चूड़ी बनाने वाली फैक्ट्री से 6 बाल मजदूरों का रेस्क्यू, एक आरोपी गिरफ्तारहरियाणाः अंबाला कैंट से BSP उम्मीदवार राजेश घायल, 2 अज्ञात लोगों ने किया हमलायूपीः 31 मार्च के बाद होमगार्ड को नए मानदेय के साथ मिलेगी पूरी ड्यूटी-चेतन चौहानसंसद के शीत सत्र की तारीखों का कल ऐलान संभव, CCPA करेगी बैठककांग्रेस की सरकार बनने की भनक पा परेशान हो उठी भाजपा : कुमारी सैलजादिल्लीः रैनबैक्सी के पूर्व सीईओ मलविंदर सिंह की पुलिस हिरासत 2 दिन के लिए बढ़ीमुर्शिदाबाद हत्याकांडः बीजेपी का एक प्रतिनिधिमंडल राष्ट्रपति कोविंद से मिलाEC ने 21 अक्टूबर को सुबह 7 बजे से शाम 6.30 बजे तक एग्जिट पोल पर प्रतिबंध लगाने की घोषणा की
 
National

Corporate tax cut positive for firms but increases fiscal risks: Moody’s

September 22, 2019 06:56 AM

COURTESY MIRROR SEPT 22

Corporate tax cut positive for firms but increases fiscal risks: Moody’s
Rating agency says factors like rural stress, slow flow of credit in the financial sector will hamper growth
#NEWDELHI

Moody’s Investors Service on Saturday said the cut in corporate tax increases the government’s fiscal risks while headwinds from cyclical factors such as rural stress, weak corporate sentiment and slow credit pose threat to near-term growth.


On Friday, the Centre announced a reduction in the base corporation tax rate to 22 per cent from 30 per cent as part of stimulus measures to revive slowing economic growth.

The rating agency said it does not expect the corporate tax rate cut to revive growth to the extent that stronger tax buoyancy compensates for the loss of revenue.

“While the reduction brings India's corporate tax rate closer to peers throughout Asia and will support the business environment and competitiveness, a host of cyclical factors, including rural financial stress, weak corporate sentiment, and a slow flow of credit in the financial sector, remain headwinds to near-term growth,” it said.

Moody’s said the cut in corporate tax is credit positive for companies because it will enable them to generate higher post-tax incomes. “However, it is credit negative for the sovereign, as it aggravates mounting risks for the government in meeting its fiscal deficit target.”

Commodity and information technology (IT) services companies will benefit most from the tax rate cut.

“But the degree of strengthening in corporate credit profiles will depend on whether companies reinvest surplus earnings into their businesses, or use them to reduce debt or to boost shareholder returns,” it said.

In aggregate, rated non-financial companies in India reported a total pre-tax net income of about USD 35 billion for the fiscal year ended March 2019.

Assuming the earnings of these companies remain unchanged for current fiscal, they will save about USD 3 billion from the tax rate reduction?

“The central government deficit target of 3.3 per cent of GDP in fiscal 2019 already assumes faster economic growth and higher tax buoyancy than we expect,” it said.

The July budget projected total corporate tax revenue of Rs 7.7 lakh crore (around 4 per cent of GDP), and the finance minister estimated that the decrease in the corporate tax rate will reduce revenue by around Rs 1.45 lakh crore in the current fiscal year.

“As such, the reduction in corporate income tax revenue – even when balanced against the windfall from the recent transfer of central bank surplus reserves, equivalent to around 0.3 per cent of GDP in the current fiscal year — further narrows fiscal room for manoeuvre,”it said.

Moody's said this assumes that the government does not cut expenditure to offset the revenue loss

Have something to say? Post your comment
More National News
मुर्शिदाबाद हत्याकांडः बीजेपी का एक प्रतिनिधिमंडल राष्ट्रपति कोविंद से मिला WB में कानून व्यवस्था पर बीजेपी डेलिगेशन राष्ट्रपति से करेगा मुलाकात महाराष्ट्र विधानसभा चुनावों के लिए बीजेपी का संकल्प पत्र जारी बीजेपी संकल्प पत्र: ग्रामीण इलाकों में 30 हजार किलोमीटर सड़क बीजेपी संकल्प पत्र: महाराष्ट्र में हर बेघर को दिया जाएगा मकान बीजेपी आज पश्चिम बंगाल में 10 दिवसीय गांधी संकल्प यात्रा निकालेगी इंदौर: असिस्टेंट एक्साइज कमिश्नर के घर पर लोकायुक्त का छापा आज से दिल्ली-एनसीआर में नहीं चलेंगे जेनरेटर कांग्रेस को न्याय, दिल्ली को चुनौती देने वाले अभिजीत को नोबेल Cabinet ministers’ total assets jump 80% in 5 years