Daily Current Affairs – 2020
Topic: For Prelims and Mains
Lowering of Corporate Tax
28th July 2020
Why in News?
The case for a uniform tax rate of 15 per cent in India will minimize tax litigation that arises due to numerous interpretations of exemptions and deductions in tax legislation.
Tax rates in India
- High rate of corporate tax : The high rate of corporate tax has been a major factor in affecting India’s ability to attract foreign investment for a long span of time.
- India had a 30 per cent rate of tax on domestic companies, including surcharge and cess, the total tax incidence is 34.9 per cent in the year 2018-19 making the country an exception.
- Tax rates of other countries : Corporate tax rate in other countries is much lower than India. For example, the US (21 per cent), the OECD average (21.4 per cent), China (25 per cent), Vietnam (20 per cent), Thailand (20 per cent), Singapore (17 per cent), etc.
- Cumbersome tax laws: Indian tax laws have exemptions and incentives that can help in reducing the tax liability in abundance but it is not sufficient enough to match the low tax rates of other countries. Further, any prospective investor gets skeptical because of the exemptions and incentives that make the Indian laws cumbersome.
- Cost of taxation firms: An investor can’t even think of running an enterprise in India without taking the services of a taxation firm for which they have to pay a hefty amount. All this gives rise to nepotism and corruption, and hampers ease of doing business because of the bureaucratic discretion.
Present Government’s initiatives on corporate tax rates:
- Then-finance minister Arun Jaitley had announced a roadmap for a phased reduction in the corporate tax over a period of five years to 25 per cent, accompanied by elimination of exemptions and incentives in the union budget of 2015-16.
- The start-ups/ new enterprises and firms having an annual turnover of less than Rs 400 crore were the only ones who got the 25 per cent rate. Including surcharge and cess, the total tax was 29.15 per cent.
- Finance minister Nirmala Sitharaman introduced a reduction of tax rates for new entities in the manufacturing sector from the existing 25 per cent to 15 per cent with no exemptions and deductions. Thus, the total tax incidence works out to be 17.1 per cent including the surcharge and cess.
- The existing companies’ tax rates were reduced from 30 per cent to 22 per cent but these are not the final exemptions and deductions that the companies would be mandated to.
- It’s the companies’ choice whether to opt for 22 per cent or stay on with the existing dispensation, i.e. 30 per cent plus exemptions/deductions.
- The tax rate is higher than most countries except for China where the tax rate is 25 percent.
- The cumbersome regime won’t go away just by giving the companies the options to choose from. The government can, thus do the following:
- Erase exemptions and deductions from the rule book but this may not be practical.
- Give the option of 15% tax sans exemptions/deductions to all the existing companies.
This will make India unambiguously the most attractive destination for foreign investors and will give a big boost to the GDP, increase in exports, better compliance, reduce litigation, and enhance recoveries.
Why in News?
The Taal Volcano erupted in Philippines recently.
- Taal is the Philippines’ second most active volcano.
- it is “very small but a dangerous volcano”
- The active volcano is at the centre of the 230 sq km Lake Taal, formed by prehistoric eruptions(a lake formed in the caldera of an earlier massive eruption)
- Volcano Island alone has 47 craters and 4 maars – volcanic craters that form when hot magma comes into contact with shallow groundwater, producing a violent steam explosion. Other vents and eruption points are underneath Lake Taal.
- Taal is a “complex volcano“, which means it doesn’t have one vent or cone but several eruption points that have changed over time
- Taal has erupted in different ways more than 30 times in the past 500 years – most recently in 1977.
- A 1911 eruption killed about 1,500 people. A 1974 eruption lasted several months
- Taal volcano is a baby volcano sitting within a much bigger caldera volcano
- Earthquakes and volcanic activity are not uncommon in the Philippines, which lies along the Ring of Fire – a zone of major seismic activity, which has one of the world’s most active fault lines.
Volcanic alert levels
- Some disturbance but no eruption soon
- Low to moderate seismicity – could eventually lead to eruption
- Relative high unrest – eruption possible within days or weeks, or it could die down
- Intense unrest – hazardous eruption possible within days
- Hazardous eruption – lava flowing -danger to nearby communities.
Why in News?
Poland is to withdraw from Istanbul Convention- a treaty aimed at preventing violence against women.
What’s the issue?
- The reason behind withdrawal is that Poland thinks the Convention is harmful because it required schools to teach children about gender. Also, it says, the treaty tries to construct a “socio-cultural gender against the biological gender”. For example, some items of the convention foresee educating children and young people about forming homosexual families.
What is the Istanbul Convention?
It is also called as the Council of Europe Convention on preventing and combating violence against women and domestic violence.
The treaty is the world’s first binding instrument to prevent and tackle violence against women.
It is the most comprehensive legal framework that exists to tackle violence against women and girls, covering domestic violence, rape, sexual assault, female genital mutilation (FGM), so-called honour-based violence, and forced marriage.
- The Convention sets minimum standards for governments to meet when tackling violence against women.
- When a government ratifies the Convention, they are legally bound to follow it.
As of March 2019, it has been signed by 45 countries and the European Union.
The convention was adopted by the Council of Europe Committee of Ministers on 7 April 2011.
Facts for Prelims
The Bombay High Court has recently said that Industrialization has reduced Nag River to a cursed lady.
- The Nag River is a river flowing through the city of Nagpur in Maharashtra, India.
- It is known for providing the etymology for the name Nagpur.
- Forming a part of the Kanhan-Pench river system, the Nag River originates in Lava hills near wadi.