Economic Survey 2022: Formalisation of economy behind big increase in corporate tax collection

Among the various factors which may have led to a big increase in corporate tax collection, improved profitability of the corporates, formalisation of the economy and improved compliance due to tax reforms are noteworthy, according to the Economic Survey for 2021-22.

The corporate income tax registered a growth of 90.4 per cent over April-November 2020 and 22.5 per cent over April-November 2019.

Large firms have become larger at the cost of smaller firms, while informal sector firms have been disrupted, HSBC said in a recent report.

Those earning their livelihoods from small and informal firms have suffered, the report added.

The rise in inequality also holds significance for the investment cycle. In the period when India's investment rate was falling, a closer look reveals that it wasn't the public sector or the private corporations leading the fall, the report said.

This category includes a bulk of the small businesses in the economy. It was already a hurting and underperforming sector even before the pandemic.

Large firms had access to capital markets while overall reliance on banking sector credit fell small firms, which don't have as much access to capital markets, and are likely to have suffered.

While many banks are keen on increasing credit to small firms this time around, whether or not it rises significantly is an area to track.

Published on: Monday, January 31, 2022, 06:01 PM IST