Corporate tax rate cut is not a magic bullet to solve growth woes but it does lift the spirits
It has been said that governments in India stare at the many problems and their possible solutions simultaneously. But the point where the government decides to act is unpredictable. It has very often been the case that such actions are highly correlated with periods when the economy is facing challenges. For example, the case for a simplified direct tax code (DTC) has been around for many years. Multiple committees set up to explore a new DTC have made the case for simplification, i.e., a lower effective tax rate to be accompanied by withdrawal of a maze of exemptions and special benefits. Like a bolt from the blue, the government on 27 September cut the corporate tax rate, unleashing one of the recommendations that has been in the various versions of the DTC.