A taxation perspective on how domestic double taxation on corporate taxes affects Indian commerce

Title

A taxation perspective on how domestic double taxation on corporate taxes affects Indian commerce

Creator

Shaji B.C.; Joseph C.

Description

This paper examines the impact of domestic double taxation on corporate taxation in India after the abolition of the dividend distribution tax (DDT) and the introduction of the new tax rates and rules in 2020. Domestic double taxation occurs when the same income is taxed twice by the same jurisdiction, such as at the corporate and shareholder level. Using data from the Income Tax Department and the Reserve Bank of India, this paper estimates the effective tax rate on corporate income and dividends in India under the current tax system. It compares it with the previous tax system and the international standards. It also analyses the effect of domestic double taxation on corporate financial decisions, such as the dividend payout ratio, the retained earnings, the debt-equity ratio, and the investment rate. It evaluates the effect of domestic double taxation on corporate tax revenue, tax incidence, and tax efficiency. The authors identify that, between 2019 and 2023, corporate income tax revenue in India increased alongside nominal GDP growth, with a notable positive correlation coefficient between the two variables. The empirical analysis technique involves gathering and analyzing quantitative data to assess the real impact of new tax reforms and reduced corporate tax rates. Finally, this study proposes policy recommendations to mitigate the adverse effects of domestic double taxation and improve India's corporate taxation system and GDP. This paper contributes to the literature by providing updated and comprehensive empirical evidence on domestic double taxation and corporate taxation in India and by offering some insights and suggestions for the policymakers, the tax authorities, the corporate sector, and the academic community. 2025 Malque Publishing. All rights reserved.

Source

Multidisciplinary Science Journal, Vol-7, No. 1

Date

2025-01-01

Publisher

Malque Publishing

Subject

corporate taxation; dividend distribution tax; domestic double taxation; effective tax rate; India

Coverage

Shaji B.C., School of Law, Christ Deemed to be University, Bangalore, India; Joseph C., School of Law, Christ Deemed to be University, Bangalore, India

Rights

Restricted Access

Relation

ISSN: 26751240

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.31893/multiscience.2025042

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85202668121&doi=10.31893%2fmultiscience.2025042&partnerID=40&md5=86522c73f781ee02de4a9e3f01f17f75