TAX NEWS - June 2010

4-5% reduction in corporate tax would be good for tax paying cos: Raamdeo Agarwal

Raamdeo Agarwal, MD, Motilal Oswal Financial Securities in an interview with ET Now talks Direct tax code and its implication on companies.

Do you think that the direct tax code, the second graph that we saw if that were to become a log there will be a material impact on the markets?

I think second code is water down largely because this capital gain tax was one of the big problem where long term was going from zero to whatever so people are thinking that will people sell and then buy back little later. But now once they are saying that at least 50% there will be deduction on the long term capital against tax if you are holding it for more than a year.

We are yet to see what will be final proposals in the sense that there could be further changes in one in the rate where earlier they were talking about 34 to 25 so that was looking very good for some of the high tax paying companies but now whether it will be 25-27-30 that only time will tell.

So even if there is a 4%-5% reduction in the corporate tax rate I think it will be good for highly profitable high tax paying companies. I think one particular thing where there is always dispute within companies authorities about whether it is a business income or investment income or capital gains from the investment at a individual level and company level I think if that is addressed properly I tell you it will go long way and direct tax code will be taken I would say on the whole positively.