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Indian Central Bank Pushes For Tax Reform

by Mary Swire,, Hong Kong

20 October 2015

Raghuram Rajan, the Governor of India's Central Bank, has urged the Government to make the country's tax regime conducive to economic growth.

In a keynote speech given at a seminar organized by the think tank Gateway House on October 19, Rajan said that tax policy is just as important as monetary policy in the overall economic policy mix. "We need to make our tax regime more investor-friendly," he said, calling for more transparent and predictable rules.

It is a message that the Government has already taken on board. Shortly before Rajan's comments, Finance Minister Arun Jaitley repeated the pledge made in his most recent Budget address that corporate tax will be cut from the current 34 percent to 25 percent over a four-year period at a gathering of business leaders.

Anita Kapur, Chair of India's Central Board of Direct Taxes (CBDT), also sought to reassure investors about India's tax climate going forward, saying recently that the agency is seeking to facilitate taxpayer compliance and simplify India's tax framework and laws. Speaking at the inaugural session of the 3rd Global Tax Summit, hosted by the Confederation of Indian Industry in Delhi on October 8, 2015, Kapur said the Government favors lower tax rates, to leave more money in the hands of businesses for investment and growth, which will in turn lead to increase revenues.

Besides the proposed reduction in corporate tax, Kapur also said that the CBDT is contemplating the removal of exemptions, highlighting that offering too many incentives tends to lead to complexity and disputes.

TAGS: compliance | Finance | tax | investment | business | India | law | tax rates | Tax

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