News of the Day Haryana, Maharashtra Assembly polls to be held on October 21, results on October 24

Elections to the Legislative Assemblies of Maharashtra and Haryana will be held on October 21, followed by counting of votes on October 24, the Election Commission announced here on Saturday.

Addressing a press conference, Chief Election Commissioner Sunil Arora said the notification for the elections in the two States would be issued on September 27, the last date for candidates to file nominations would be October 4, the date for scrutiny of nominations would be October 5 and the last date for withdrawal of candidature would be October 7.

The term of the Haryana Assembly, with 90 seats, comes to an end on November 2, and the 288-seat Maharashtra legislature’s term expires on November 9. In the run-up to the announcement, Mr. Arora said ECI officials had visited the States and found them to be prepared since Lok Sabha elections were held less than six months ago.

A total of 1.82 crore electors in Haryana and 8.95 crore in Maharashtra will be eligible to vote.

Mr. Arora also announced that by-elections to 64 Assembly seats across States will be held on October 21.

Corporate tax reduction is credit positive for companies, but increases government’s fiscal risks, says Moody’s

Corporate tax reduction is credit positive for companies, but increases government’s fiscal risks, according to Moody’s Investors Service, which does not expect the corporate tax rate cut to revive growth such that stronger tax buoyancy compensates for the loss in revenue.

India on Friday announced a reduction in the base corporation tax rate to 22% from 30% as part of stimulus measures to revive slowing economic growth.

“The move is credit positive for companies because it will enable them to generate higher post-tax incomes. However, it is credit negative for the sovereign, as it aggravates mounting risks for the government in meeting its fiscal deficit target,” said a Moody’s statement.

Among Moody’s rated non-financial companies in India, commodity and information technology (IT) services companies will benefit most from the tax rate cut. However, the degree of strengthening in corporate credit profiles will depend on whether companies reinvest surplus earnings into their businesses, or use them to reduce debt or to boost shareholder returns.

In aggregate, rated non-financial companies in India reported a total pre-tax net income of about $35 billion for the fiscal year ended March 2019 (fiscal 2018).

Assuming the earnings of these companies remain unchanged for fiscal 2019, they will save about $3 billion from the tax rate reduction, according to Moody’s.

The central government deficit target of 3.3% of GDP in fiscal 2019 already assumes faster economic growth and higher tax buoyancy than Moody’s expectations.

The July 2019 budget projected total corporate tax revenue of 7.7 trillion ($108.5 billion, around 4% of GDP), and the Finance Minister estimated that the decrease in the corporate tax rate will reduce revenue by around 1.5 trillion in the current fiscal year.

As such, the reduction in corporate income tax revenue – even when balanced against the windfall from the recent transfer of central bank surplus reserves, equivalent to around 0.3% of GDP in the current fiscal year – further narrows fiscal room for manoeuvre.

This assumes that the government does not cut expenditure to offset the revenue loss.

While the reduction brings India’s corporate tax rate closer to peers throughout Asia and will support the business environment and competitiveness, a host of cyclical factors, including rural financial stress, weak corporate sentiment, and a slow flow of credit in the financial sector, remain headwinds to near-term growth.

“We do not expect the corporate tax rate cut to revive growth such that stronger tax buoyancy compensates for the loss in revenue,” said Moody’s statement.

Source – The Hindu

shivam