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CII Calls On India To Stabilize Tax Regime

by Mary Swire,, Hong Kong

29 November 2013

The Confederation of Indian Industry (CII) has called on the Government to offer greater clarity in its taxation of multinational companies, with the aim of addressing concerns and repairing investor confidence.

A new CII white paper, released in conjunction with accountancy firm Ernst & Young, surveys the emerging trends in global taxation and considers how they are impacting on India's tax policy.

CII Director General Chandrajit Banerjee said of the document: "Our country presently needs a tax system which is simple, broad-based, less litigious, and transparent, and ensures international competitiveness. We need to benchmark our systems with international best practices."

The paper focuses to a large extent on the international crackdown on tax avoidance. It notes both the publication in July of the Organization for Economic Cooperation and Development's (OECD) Action Plan on base erosion and profit shifting (BEPS), and the determination of the G20 group of nations to prevent "double non-taxation."

The CII stresses that India is actively working with the OECD on its BEPS project, but warns that tackling the problem "requires a multi-dimensional approach, especially as the apprehension is about whether companies follow the spirit of the law or whether they pay [a] fair share of taxes as per the law of the land."

The Confederation recommends that India's proposed new General Anti-Avoidance Regulations (GAAR) should be applied as an exception, rather than a rule. They should not be used in cases where Specified Anti-Avoidance Rules are already in place.

The white paper also recognizes the growing tension between multinational corporations and revenue authorities over the enforcement of transfer pricing rules. It argues that taxpayers must consider their "options of dispute resolution and determine the comparative benefits of adopting safe harbour rules, continuing with the litigation, or applying for APAs."

Finally, the CII urges the early implementation of the much-delayed goods and services tax (GST) in India. The GST should "simplify and rationalize the current indirect tax regime in the centre and states, eliminate tax cascading and put the Indian economy on a higher growth trajectory."

TAGS: tax | value added tax (VAT) | India | tax avoidance | tax incentives | revenue guidance | law | goods and services tax (GST) | enforcement | ministry of finance | tax authority | tax planning | transfer pricing | tax rates | G20 | revenue statistics | tax reform | trade association | trade | services | Regulations | Tax | Tax Evasion

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