Inflation, Corporate tax provisions and investment in India

By:

Birla Institute of Scientific Research Economic Research Div

Material type: Text

TextPublication details: New Delhi; Radiant; 1985Description: 134 pSubject(s):

Inflation

DDC classification:

332.673094 Bir

Summary: This topical volume presents estimates of effective corporate tax rates on incremental Investment in capital assets under different tax codes and tax scenarlos for India. These estimates are important because they, and not average tax rates, determine incentive to undertake additional Investment. The estimates of marginal tax liability highlight the effect of concessions such as depreciation allowance, Investment allowance, etc. and disincentives like Inflation on tax rates confronting an investor. Similar estimates have already been made for countries like the Federal Republic of Germany, Sweden, the United Kingdom and the United States. By extending them to a developing country like India, this study fills a very critical gap in the existing literature. The book focuses on the impact of inflation in eroding the value of depreciation allowances. It discusses in detail possible solutions like indexation and acceleration of these allowances together with their merits and demerits. It examines the effect of the proposal, made by the Economic Administration Reforms Commission to accelerate depreciation for plant and machinery, on the effective tax rates. The study computes the tax liability for Indian investors with the British type of "Tax Reform" introduced in the 1984-85 budget. This has now assumed special significance in view of the Indian budget of 1985-86 in which proposals on similar lines have be made. A postscript estimates the margina tax rates under the two budget proposals. The study concludes that depreciation allowance for many categories of plant and machinery ought to be raised. It argues that investment allowance should under no circumstances be withdrawn and that it should be slightly enhanced to promote capital formation and mitigate the effects of rising prices and rapid advancement in technology on marginal tax liability. This book is indispensable for finance/tax managers of corporations, policy makers and students of Indian economics and public finance.

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Holdings
Item type	Current library	Call number	Status	Date due	Barcode	Item holds
Books	Gandhi Smriti Library	332.673094 Bir (Browse shelf(Opens below))	Available		31053

Total holds: 0

This topical volume presents estimates of effective corporate tax rates on incremental Investment in capital assets under different tax codes and tax scenarlos for India. These estimates are important because they, and not average tax rates, determine incentive to undertake additional Investment. The estimates of marginal tax liability highlight the effect of concessions such as depreciation allowance, Investment allowance, etc. and disincentives like Inflation on tax rates confronting an investor. Similar estimates have already been made for countries like the Federal Republic of Germany, Sweden, the United Kingdom and the United States. By extending them to a developing country like India, this study fills a very critical gap in the existing literature.

The book focuses on the impact of inflation in eroding the value of depreciation allowances. It discusses in detail possible solutions like indexation and acceleration of these allowances together with their merits and demerits. It examines the effect of the proposal, made by the Economic Administration Reforms Commission to accelerate depreciation for plant and machinery, on the effective tax rates. The study computes the tax liability for Indian investors with the British type of "Tax Reform" introduced in the 1984-85 budget. This has now assumed special significance in view of the Indian budget of 1985-86 in which proposals on similar lines have be made. A postscript estimates the margina tax rates under the two budget proposals.

The study concludes that depreciation allowance for many categories of plant and machinery ought to be raised. It argues that investment allowance should under no circumstances be withdrawn and that it should be slightly enhanced to promote capital formation and mitigate the effects of rising prices and rapid advancement in technology on marginal tax liability.

This book is indispensable for finance/tax managers of corporations, policy makers and students of Indian economics and public finance.

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