The Confederation of Indian Industry (CII) said this in a statement following expiry of the deadline to deposit old Rs 500 and 1,000 notes in banks.

"With a larger share of the economy captured in the tax net, the government has greater space to lower corporate income tax rates. In our recommendations for budget 2017-18, the CII has called for reducing the corporate income tax rate to 18 per cent, including all surcharges and cess, along with removal of all tax incentives and concessions," CII Director General Chandrajit Banerjee said here.

"Going by experience, it is found that a lower tax rate encourages higher compliance. We believe that lowering the tax rate to 18 per cent and removing all tax exemptions will not negatively impact the government revenues on this head," he said.

"CII notes that there are 32 incentives applicable on corporate profits before calculating tax. The effective tax rate works out to about 19.8 per cent," the statement said.

It said that in its pre-budget suggestions to the Finance Ministry, the CII has requested a four-pronged strategy for strengthening economic activity by reducing corporate income tax rate, revival of investments, creation of better quality jobs in the formal sector, and a national technology strategy with a "ten-fold increase in public investment in research in higher education institutions".

"A National Innovation Fund with a corpus of at least Rs 10,000 crore should be set up, using Rs 8,000 crore collected through cess on technology imports," it said.