Uday Kotak Advocates Tax Reform For Balanced Growth In Indian Markets
'We need to scrutinise the entire infrastructure of our financial system,' Kotak says.
There is a need for a more balanced approach to taxation to encourage both equity and debt investments, said Uday Kotak, founder of Kotak Mahindra Bank Ltd.
"I think from the position of a saver or investor. If I am taxed at 10% on equities, which I think is a good thing because you need to encourage equity culture before it is misunderstood, I think 40% marginal tax on debt certainly dissuades every saver from considering the debt option," Kotak said.
Given the imbalance in taxation for equity and debt, there is a need for a closer examination of the entire financial system to ensure the harmonious coexistence of both markets for sustained growth, he said.
Currently, a trader can leverage themselves at a 6:1 debt-equity ratio at rates lower than those available to an AAA corporate. Hence, a comprehensive reassessment of the system is imperative, Kotak said.
"We need to scrutinise the entire infrastructure of our financial system. This scrutiny should aim to create an environment where both the pillars of the market, equity and debt, operate synergistically, fostering sustained growth over an extended period," he said. "At times, the fiscal side has some very different choices—what is right for public policy versus what is right for their short-term revenue."
Kotak urged policymakers to prioritise long-term perspectives, balancing public-policy considerations with short-term revenue implications in decision-making processes.
"Therefore, we need to look at the gap, and I am not suggesting any particular direction, but 10 to 40 is a very large gap in terms of outcomes," he said about fiscal incongruity.
There is a need for streamlining taxation across various classes, including double taxation on dividends, Kotak said.
