Foreign firms' tax burden hits record low in India

Corporation tax cuts, GST reforms, compliance measures behind decline in tax outgo

- SACHIN P MAMPATTA

Foreign firms now pay less tax relative to their earnings than at any time in more than three decades. Foreign private companies paid 24.36 per cent of their pre-tax profit as tax in 2023-24, show numbers from the Centre for Monitoring Indian Economy (CMIE).

The numbers are from the firms that made their data available so far. Unlisted companies often file financials with a lag. But the numbers can be considered broadly indicative of the trend because the sample of 390 firms includes around 60 per cent of the entities seen in previous years. The tax outgo is a significant decline from the peak in 2017-18, when companies paid the equivalent of 48.43 per cent of their pre-tax earnings in the form of tax.

Taxes on foreign companies have been in the news after American President Donald Trump announced the country would not be part of a 2021 agreement on uniform taxation.