Left For Mat On Gross Profits

The Communist Party of India (Marxist) not only wants the minimum alternate tax (MAT) to remain next year, but suggests that it needs to be strengthened. Party leaders say that the present system of asking companies to pay taxes on the basis of their book profits leaves too many loopholes.

CPI (M) politburo member Sitaram Yechury says that despite MAT, companies like Reliance Industries Ltd (RIL) have not paid even a single paisa as tax. RIL's gross profit stood at Rs 15,000 crore last year. Logically, it should have paid Rs 170 crore as taxes. But, it did not pay even a single paisa till December 1996, says Yechury.

 

He suggests that the MAT should be charged on the gross profits of a company and not on its book profits. Of course, the dual accounting procedure, sanctioned by differing methodology spelt out under the Companies Act and the Income Tax Act, enables a company to show profits to stockholders and yet report a no-tax liability by taking advantage of depreciation provisions and other tax set-offs.

The Communist Party of India leaders, too, want MAT to be retained. Party general secretary A B Bardhan suggested at a recent United Front (UF) steering committee meeting that the government impose a presumptive tax. Union finance minister P Chidambaram had introduced the MAT in the last budget following demand from the Left parties that zero-tax companies should be brought into the tax net. The corporate sector has lobbied vigorously against it. Answering their arguments, Left leaders say that corporate houses have a social responsibility and should pay taxes.

On the issue of double taxation, however, Yechury says that the dividend tax, which many in the corporate sector have opposed, can be dispensed with, provided there is no revenue loss to the government and companies are adequately taxed in other ways. CPI deputy general secretary N Giri Prasad also says that since there is already a corporate tax and a personal tax, there is no rationale for continuing with the dividend tax.