4-5% reduction in corporate tax would be welcome: Raamdeo Agarwal

Raamdeo Agarwal, MD, Motilal Oswal Financial Securities in an interview with ET Now talks on the Direct Tax Code and its implication on companies.

Do you think that the direct tax code, if that were to become a law, there will be a material impact on the markets?

I think second code is watered down largely because this capital gains tax was one of the big problems where long term was going from zero to whatever. So people are thinking that whether investors will sell and then buy back little later. But now, they are saying there will be at least 50% deduction on the long term capital if you are holding for more than a year.

We are yet to see what will be the final proposals, in the sense that there could be further changes in the rate where earlier they were talking about 34 to 25. So that was looking very good for some of the high tax paying companies but now whether it will be 25-27-30, that only time will tell.

So even if there is a 4%-5% reduction in the corporate tax rate, I think it will be good for highly profitable high tax paying companies. Where there is always dispute within companies authorities about whether it is a business income or investment income or capital gains from the investment at a individual level and company level. I think if that is addressed properly, I tell you it will go long way and direct tax code will be taken positively.