no two industries will be functioning alike, impacting the economy in same manner; hence both cannot be subjected to identical degree of taxation on income. rational segregation of enterprises is the foundation of this notion.
any enterprise would be involved in either an ‘essential’ or ‘complimentary’ production. steel, consumer goods as essential, and telecom, information technology as complimentary.
we know that contribution from primary, secondary and tertiary sectors makes up country’s gdp. primary sector includes agriculture, mining and like, secondary includes manufacturing, electricity and like, and tertiary includes all services.
alike taxation of companies functioning in different sectors is irrational in long run.
let’s understand why. an enterprise undertaking mining activities has dissimilar factors of production as compared to another that produces computer programs. the risks in agriculture or manufacturing sector outnumber those in tertiary sector, while margins of latter outdo that of former.
for instance, retail works on the difference in price charged from buyer to what was paid to the seller. manufacturing a garment, however, is poles apart, from spinning machines to dyeing machines procured, intensive labour applied, servicing of interest on loans for plant and machinery.
it is simple. similar to how the rich are taxed more than those earning less (progressive taxation), companies working on more risks and less margins are to be incentivized on similar lines.
else, as is in the present state, we can see telecom and it ventures faring exceptionally better than their counterparts in steel, infrastructure and other core sector activities.
once put into place, this mechanism will not only help recover the health of manufacturing and primary sector, it will make our banking system healthier, will push real and sustainable job growth, will bring down inflation and promote equity.
give your verdict:
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