The impact of company income tax revenue on developing countries.

India is a country where we are building unicorns every day, most of these companies struggle to gain profit in their early days. While companies work on losses to gain coatomer, if they can save some money in the form of tax it will be the best thing for them. So, most of the companies register themselves in countries that have less corporate tax such as Singapore and Vietnam. Companies such as Flipkart, and Razor pay are some companies that are registered in Singapore.

Let’s first understand what corporate tax is: -

Corporation Tax or Corporate Tax is a direct tax levied on the net income or profit of a corporate entity from their business, foreign or domestic. The rate at which the tax is imposed as per the provisions of the Income Tax Act, 1961 is known as the Corporate Tax Rate.

Company income tax:?This Tax is payable for each year of assessment of the profits of any company at a rate of 30%. These include profits accruing in, a derived form brought into or received from a trade, business, or investment.

Policy:?can be referred to as prudent conduct, sagacity or a general plan of action to be adopted by an organization.

Taxation policy:?therefore,?is the general plan of action on the pattern of arriving at a taxable amount that is considered both to the management and shareholders or investors of the companies.

Financial obligation:?it is the expected activities pertaining to the monetary accumulation, earnings, and transaction records of companies. Paying taxes to the government is one of such obligations.

Let’s understand in layman's language and in detail about Increasing tax revenue in developing countries

In lower- and middle-income countries, tax revenue collection as a percentage of GDP is around 15 to 20%, whereas it is over 30% in upper-income nations. This discrepancy is significant because it suggests that less tax income is available for public goods like infrastructure and sound governance in emerging nations. Closing this gap is more difficult than it might appear on the surface because it is primarily a result of issues with tax collection in developing nations, such as informality and underreporting by both workers and businesses. Due to their inability to raise the necessary funds to invest in public goods, developing nations are trapped in a vicious cycle where they continue to be impoverished. This brings to light a significant development challenge: what policies can strengthen governments' capacity to generate income and use that income to fund public goods in poor nations?

The good news is that a growing body of research has identified a variety of strategies that help boost tax collections in developing nations.?analyze experimental and quasi-experimental work with tax authorities, the causes, and effects of informality among enterprises and workers. These are just two examples of the many outstanding evaluations of the larger body of literature that are available. This blog, with a focus on developing country contexts, highlights some of the most recent empirical work in this area, spanning interventions aimed at directly increasing compliance (tax incentives, simplification and reminders, tax morale) as well as directly increasing the observability of the potential tax base (information, formalization).

In a country like China, Singapore has built its economy on the basis of skilled labor and subsidiary on TAXES, corporate feel more comfortable in the country of China, and Singapore.

Some, initiatives of governments are really appreciatable and Govt. of India and the Ministry of MSME have launched several unique Government schemes and programs designed to empower startups and MSMEs in India. We have covered the top 5 Government Schemes for Startups and MSMEs, which can help them trigger growth, and more business.

Top 5 Government Schemes for Start-ups and MSMEs In India

“Govt. of India and the Ministry of MSME have launched several unique Government schemes and programs designed to empower startups and MSMEs in India. We have covered the top 5 Government Schemes for Startups and MSMEs, which can help them trigger growth, and more business.”

When it comes to Micro, Small, and Medium Enterprises (MSMEs) and startups, then the Govt of India is very clear: They need to be nurtured, protected, and encouraged for India’s betterment.

Govt of India wants MSME’s contribution to India’s GDP to reach 50% by 2024, from the current 29%, and provide jobs to 15 crore Indians, up from 11 crores currently. Therefore the Ministry of Micro, Small, and Medium Enterprises has introduced several Government schemes for startups, and small businesses, which aim to provide them with more resources and a platform for triggering more growth.

Startups and MSMEs are the foundation based on which the Atma Nirbhar mission and Make In India vision will succeed – Generating more employment, increasing exports, improving the standard of living for millions of Indians, and making India strong globally.

Regarding startups, especially tech startups, India ranks among the fastest-growing ecosystems. Last year, Venture Capitalists infused a record-breaking $48 billion into Indian companies and ideas for expanding their presence.

Hence, right now, India is in a unique position wherein both Govt and private investors want Indian entrepreneurs and startups, MSMEs to succeed and make their presence felt across the world. In this endeavor, the Govt of India and the Ministry of Micro, Small, and Medium Enterprises have launched several unique Government schemes and programs designed to empower startups and MSMEs in India.

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Here are the Top 5 Government Schemes for Startups and MSMEs, which can help them trigger growth, and more business:

1. Pradhan Mantri Mudra Yojana

PM Modi launched Pradhan Mantri Mudra Yojana, wherein Micro Units Development and Refinance Agency Bank MUDRA Banks provide loans at low rates to micro-finance institutions and non-banking financial institutions, who in turn provide low-interest loans to startups and MSMEs.Hence, Pradhan Mantri Mudra Yojana is one of its kind fund of funds, devised and conceptualized to empower Indian entrepreneurs. Loans up to Rs 10 lakh can be availed under the MUDRA scheme.

It was launched in 2015 and within 2 years, more than 1.8 crore jobs were generated due to the loans and business generated via MUDRA. Till August 14th, 2020, more than 67 lakh loans amounting to Rs 48,000 crore have been sanctioned under the MUDRA scheme.

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·???????Category 1: Shishu, which is for new businesses. Loans up to Rs 50,000 can be availed.

·???????Category 2:?Kishor, which is a mid-aged business. Loans up to Rs 5 lakh can be availed.

·???????Category 3:?Tarun, which is an existing, experienced business. Loans up to Rs 10 lakh can be availed.

2. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTSME)

CGTSME is one of the biggest Startup Loan Schemes launched by the Ministry of MSME in India.

Under this Government scheme, a collateral-free loan of up to Rs 1 crore is provided to eligible start-ups and MSMEs.The loan is dispersed via a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which is powered by the Ministry of MSME and Small Industries Development Bank of India (SIDBI).

3. Financial Support to MSMEs in ZED Certification Scheme

Focussed on existing and new manufacturing units, ZED or Zero Defect and Zero Effect's mission are to encourage manufacturers to create better products, with high quality and zero defects. The focus is to enable manufacturers to embrace world-class manufacturing processes, and use technology to ensure that their products are the best in the class.

The government scheme will provide financial support, technology, and tools to ensure zero defects in their products.

4. Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)

Govt is clearly aware that technology is the tool that can propel Indian startups and MSMEs to compete with global competitors.

This is the reason for the creation of the Credit Linked Capital Subsidy for Technology Upgradation (CLCSS) Government scheme, wherein Govt provides financial help to MSMEs to upgrade their technology and implement state of an art technological platforms for their business.

5. Design Clinic for Design Expertise to MSMEs

Design and innovation are critical for any sector, and every startup and MSME should have a design-centric approach to solve the problems of their niche. In order to encourage and inspire small businesses to experiment and try out new designs for their products, the MSME Ministry has created a Design Clinic for inducing design-related expertise for startups and MSMEs.

Under this Government scheme, Govt. will provide up to Rs 60,000 aid for attending design seminars and up to Rs 3.75 lakh or 75% of the cost of a workshop, wherein the entrepreneur and/or their team can learn and implement design theories and learn more about them. Via this program, entrepreneurs can know about the latest trends and practices related to designs, interact and network with other designers, and entrepreneurs, and learn in-depth about design mentality and theories.

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Conclusion: -

If a developing country such as India wants to reach the tag of a developed nation in the next 20 years, Government has to give some subsidiary on taxes to companies and incentives to foreign countries so, that they can register themselves in India and we can create more Jobs

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References: -

https://www.msmex.in/learn/government-schemes-for-startups-and-msmes-in-india/

https://iproject.com.ng/taxation/the-impact-of-company-income-tax-revenue-on-developing-economies/index.html