Corporate taxation is an integral part of the functioning of any economy. It
is a form of tax levied on the profits earned by corporations or businesses.
Corporate taxation plays a crucial role in generating revenue for the government
and funding various developmental activities. However, it also brings with it a
set of challenges that can hinder the ease of doing business.
Corporate taxation refers to the imposition of taxes on the profits earned by
corporations. The tax rate is usually determined by the government and can vary
from country to country. It is an essential component of the revenue generation
system of a nation and helps finance various social, economic, and
infrastructure development initiatives.
Corporate taxation has several advantages. Firstly, it serves as a significant
source of revenue for the government. The taxes collected can be used to fund
public goods and services like education, healthcare, and infrastructure
development. Secondly, it helps promote fairness and reduces income inequality.
By taxing corporate profits, the burden is shared by the business entities
rather than individuals alone. Lastly, corporate taxation also acts as a
regulatory tool to discourage tax evasion and promote transparent financial
However, corporate taxation also poses challenges that can impede the ease of
doing business in a country. One major disadvantage is the complexity of the tax
system. Corporate tax laws are often intricate, with numerous rules,
regulations, and exemptions. Complying with these laws requires expertise and
resources, which can be burdensome for smaller businesses.
Furthermore, the high tax rates can act as a deterrent for businesses and
discourage investment and growth. It also creates an incentive for businesses to
engage in tax planning strategies, such as profit shifting, to minimize their
In the context of India, corporate taxation has undergone significant reforms in
recent years. The government has taken several initiatives to ease the burden on
businesses and improve the ease of doing business. One notable reform is the
reduction in the corporate tax rate. In 2019, the government introduced a lower
tax rate of 22% for domestic companies, and 15% for new manufacturing units.
This move aimed to boost investment, encourage entrepreneurship, and attract
foreign direct investment.
However, challenges still persist in India's corporate tax regime. One such
challenge is the complex tax structure, which often leads to confusion and
disputes. The multiple layers of taxes, such as the Goods and Services Tax (GST)
and the various state-level taxes, make compliance a daunting task for
businesses. Moreover, the frequent changes in tax laws and regulations create
uncertainty among businesses and hinder long-term planning and investment.
Corporate taxation is vital for generating revenue and fostering socio-economic
development. While it has advantages like revenue generation and promoting
fairness, it also poses challenges that impact the ease of doing business. The
complexity of tax laws, high tax rates, and frequent changes in regulations can
discourage investment, hinder growth, and create compliance burdens for
Therefore, a balanced approach is essential to maintain a tax regime that
ensures revenue generation while fostering a conducive environment for
businesses to thrive.
Award Winning Article Is Written By: Ms.Ankita Nenaram Paldiya - Manikchad Pahade Law College.
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