CII unveiled a white paper on “Tax Reforms – Winds of change and India’s response” in the CII 3rd Global Tax Summit held on 8th October 2015 in Delhi. The paper explores the changing tax landscape across the globe. It also discusses the policy and administrative reforms needed in India for a facilitative tax environment that will provide stability, and encourage investments and growth.
India’s strong growth potential amid a difficult global environment makes it an attractive investment destination. There are high expectations that the reforms envisioned by the Government will provide new opportunities for growth and investments. The tax reforms agenda is at a prominent position in this context.
Around the world, the underlying trend is of countries moving towards a broad-based, low-rate corporate tax environment. At the same time, many countries are also gearing up to introduce BEPS-related tax reform to protect their tax turf and check profit shifting. The final BEPS reports on all 15 focus areas addressing Base Erosion and Profit Shifting have been made public.
These trends and forces are redrawing the architecture of International Taxation. The years to come will see a greater focus on multilateralism, more transparency and reporting requirements, stricter tax enforcement, and a new set of rules defining the way domestic/ overseas profits are taxed. An inevitable corollary to these developments will be a rise in tax disputes.
So how is India responding to the changes? The Finance Minister has announced a phased reduction in the corporate tax rate in keeping with the global trend. The corporate sector will also need to forego some of the current incentives in lieu of the rate reduction. This will also be in the interest of simplification of tax laws.
On the indirect taxes front, the most awaited tax reform in India is the Goods and Services Tax (GST). While the Constitutional amendment to enable the implementation of GST is still pending, the Industry hopes for an early introduction of a comprehensive and fair GST that will propel economic growth.
Indeed, India is taking the right steps toward tax reforms. What is needed now is a focus on effective and time-bound implementation of the positive reforms already announced. Top minimize uncertainty, the industry looks to a structured consultative process as the Indian Government amends tax laws in response to global developments. Equally important will be the tax administrative reform. The alternative dispute resolution mechanisms in particular, need to improve, to take on the challenge of newer controversies that the transition will bring.