Corporate Tax Policy Issues and Options

K C Sharma This paper examines the need for and revenue potential of the Minimum Alternative Tax (MAT) levied on the book profit of companies against the Alternative Minimum Tax (AMT) which is leviable on their total assets as suggested by the World Bank and argues for the enforcement of either of these two measures. It further makes out a case for reduction in corporate tax rates coupled with reduction in fiscal incentives which are prone to misutilisation. It also suggests a reduction in the depreciation rates admissible under the Income Tax Act for bringing about their harmonisation with the corresponding rates admissible under the Companies Act, which would also neutralise the loss of revenue from abolition of MAT if it is so decided in the next budget.