Here’s an idea for the finance minister of India, P. Chidambaram, who has an avowed preference for lower taxes: Slash the levy on corporate profits to 15%.

That’s less than half of the current 33.7% corporate-tax rate. Before the government’s Marxist backers start complaining about how a reduction would sacrifice the welfare state at the altar of corporate greed, Mr. Chidambaram should hasten to show them that he might end up collecting more money.

According to a study released last week by PricewaterhouseCoopers LLP and the World Bank, the real burden of corporate tax in India, after companies take advantage of the relief granted by law, is 14.3% of pretax profit. That’s less than the 17.7% in China and 22.4% in Brazil.

Among the so-called BRIC economies — Brazil, Russia, India, and China — only Russia has a lower effective corporate-profit tax rate of 12.7%.

Shifting to a 15% flat rate and scrapping the exemptions that companies use to lower their effective tax load should not result in any loss of the Indian government’s revenue.

If anything, Mr. Chidambaram would get more money from better compliance. Besides, adopting Asia’s lowest nominal corporate tax rate would get India great publicity among foreign investors.

Yet how do companies gain if, irrespective of the reduction in the declared tax rate, they keep paying the same share of their profits to the exchequer? To make a real difference to corporate competitiveness, something else needs to change, too.

A much bigger share of company earnings in India — as much as 47%, according to the PwC/World Bank report — is usurped by the state in the form of “other” taxes.

These indirect levies should, by definition, have no impact on corporate profits because the government is supposed to use companies as mere collection points. The tax is to be borne by the final customers.

In fact, that’s why governments are shifting to value-added taxation, or VAT for indirect tariffs — to ensure that levies collected by a company on behalf of the state don’t end up as costs on its income statement.

The excise duty in India has followed the principle of value addition for two decades. Since April 2005, the levy on sales has also been replaced by VAT. If the “other” taxes in India are still eating up almost half of the money that should be flowing to shareholders, there’s clearly a deficiency.

Including a 19% payout toward employee pensions and other labor-related taxes, 81% of corporate earnings in India is taken away by the government. Only 12 nations charge profits more aggressively, and these include Burundi and Belarus.

Services account for half of India’s gross domestic product, though people providing them are often unregistered tax entities.

This year’s target for service tax is 345 billion rupees ($7.7 billion), less than half the amount that India aims to get from customs duties. When service tax starts fetching the government twice as much as import tariffs, India will have both a more stable taxation system and a more open economy.

Finance Minister Chidambaram wants to integrate the fledgling 12% service tax with the 16% tax on production and the 12.5% VAT. Moving over to an integrated goods-and-services tax, or GST, is a splendid plan.

Pegging the GST at 15%, the same as the corporate tax rate proposed by this columnist, will be an elegant way to signal to the market that India’s tax regime has become stable.

One final improvement will be to scrap all the different individual income-tax rates and replace them with an Eastern European-style flat charge.

For the sake of symmetry, this rate, too, can be 15%, compared with the current top-bracket levy of about 34%. Once again, all the exemptions must be scrapped, though the threshold level, below which no income is taxable, can be kept reasonably high to avoid burdening the poor.

This will practically kill evasion, the bane of India’s progressive tax system, wherein rates rise with incomes.

It’s regressive, the Marxists might say, not to take away a big chunk of the income of the very rich. It’s doubly anti-poor to do so while charging a high GST, which even the most indigent can’t escape when it’s applied properly.

Progressive taxation doesn’t always work for the poor.

Last year, India collected 662 billion rupees from income tax. There are 18 million households in India with annual income of more than 200,000 rupees. If the government had been able to charge a reasonable 4,000 rupees on average from each such family in a month, it would have earned more and provided better services to the poor.

It should be possible to raise collection with a low, flat income tax rate. In any case, it’s easier to track and penalize consumption, so that’s where most of the effort of collecting government revenue must focus. At the same time, the poor can be easily compensated for their GST burden with cash transfers.

The combination of low direct taxes and a reasonably high GST is being increasingly recognized by national authorities as an efficient way to boost savings and investments in an economy. Mr. Chidambaram should grab the opportunity.

Mr. Mukherjee is a columnist for Bloomberg News.