Mid-size IT firm Happiest Minds Technologies has doubts over the possibility of the US reducing the corporate tax rate to 15 percent from 22 percent, a possibility being talked about when Donald Trump takes over as the president in January.
However, the assurance of tax policy renewal in 2025 has brought stability, easing uncertainties for businesses planning long-term in the key market for IT firms, the Bengaluru-based IT firm's management said at a press conference.
“I'm still wary of the corporate tax cuts coming down from 22 percent to 15 percent. I think that's too much of a drastic drop but at least the certainty is that current tax rates will continue and will get renewed in 2025, providing stability,” Happiest Minds Executive Director Rajiv Shah said on November 15.
With Trump returning to the White House, the much-talked-about cut in corporate tax rate might be around the corner, experts have said. It would prove to be a much-needed shot in the arm for IT companies, which have taken a hit as their clients tighten belts.
During his campaign, Trump proposed lowering the tax to 15 percent for certain companies.
The company is of the view money saved through tax cuts “takes a long while” to make its way to investments, and therefore getting back as spending into companies, Happiest Minds said.
“So I think even if tax rate cuts are going to happen, people will enjoy for the first one, one and a half years, and then slowly that cash gets released and then think about investments,” Shah said at the conference.
Investment cycles are typically driven by either return on capital or market forces dictating where investments need to be made.
IT companies such as Tata Consultancy Services, Infosys, HCLTech and Wipro are reporting a multi-decadal low in revenue growth, mostly in the low single-digits. A corporate tax cut could hand over businesses additional capital to re-invest in technology.
The management added that with both Trump in the White House and the Republicans in control of Congress, it would make for a strong government and pave the way for the business situation to be more amenable.
“So our expectation is that the market is going to become much better and that's the kind of indication also we are getting from the customer side in terms of the decisions (that) will be taken. And that is going to be helpful for all the business,” Shah said.
Also read: Client budgets delayed due to conflicting macro data, says Happiest Minds
The Bengaluru-based company revenue was up over 12 percent sequentially at Rs 52.1 crore in the September quarter. However, profit declined 3 percent to Rs 49 crore due to higher interest expense and tax.
Operating margin increased 1.7 percentage points to 17.9 percent despite wage hikes and acquisitions.
The Ashok Soota-led company said the acquisition of PureSoftware and Aureus, the creation of its Generative artificial intelligence (Gen AI) business unit (GBS), and the creation of six industry groups will have a positive impact on revenue and growth in the quarters ahead.
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