New Delhi, Jan 15 (PTI) The UK-India Business Council on Friday said it has suggested making the tax structure identical for domestic and overseas companies in India as part of its pre-Budget recommendations submitted to Finance Minister Nirmala Sitharaman.
'Globally, the general practice is to have a tax rate parity across all kinds of companies within the same industry. Examples are all BRIC countries except India and a majority of OECD countries (UK, Japan, etc.) as well as important financial centres like Hong Kong & Singapore,' Jayant Krishna, Group CEO, UK-India Business Council (UKIBC) said in a statement.
The reduction in corporate tax rate for domestic companies coupled with abolition of Dividend Distribution Tax (DDT) creates a significant disparity between the effective tax rates applicable to foreign companies and domestic companies, UKIBC said.
At present, the corporate tax rate for foreign companies is 43.68 per cent, while domestic companies have to pay 25.17 per cent as corporate tax, the Council said.
'A reduction in the corporate tax rate for foreign banks' branches will provide a level playing field for them as compared to branches of domestic banks and encourage investment by foreign entities that are keen to invest in India through a branch route,' Krishna said.
UKIBC's group chair Richard Heald, OBE urged the government to further accelerate the pace of economic reforms through Budget announcements which would eventually lead to enhanced investment and trade footprint of UK's businesses in India.
Apart from this, UKIBC also suggested the government to increase allocations for defence sector to over 2.5 per cent of GDP and raise foreign direct investment (FDI) limit through automatic route in the sector to 100 per cent from 74 per cent.
It also sought increase in insurance sector FDI limit to 100 per cent from 49 per cent and hike in government spending on education and skill development.
UKIBC also asked for mutual recognition of degrees between India and major countries, including UK, removal of retrospective taxation, fast-tracking disinvestment of public sector undertakings (PSUs), customs duty reduction for import of alcoholic spirits, and a regulatory regime for online gaming and sports betting.
The Union Budget will be presented in Parliament on February 1. PTI RSN RVK