The Union Revenue Secretary, Mr Sunil Mitra, said here on Tuesday that domestic tax policy would gradually move towards treaty override and introduce measures against aggressive tax planning and tax avoidance. Addressing a FICCI function here, Mr Mitra sought greater responsibility from corporate sector including foreign companies on the issues of illicit fund outflow on account of mis-pricing and misuse of offshore financial centres (OFC).
The revised Direct Taxes Code Bill, yet to be finalised, has dropped some of the earlier proposals after objections from the corporate pressure groups including those of foreign companies.
He said the DTC provisions marked only a “balanced policy shift towards limited treaty override.”
Explaining the rationale, the Revenue Secretary said: “As a commitment to G-20 decision on developing a tool box of counter measures against non-cooperative jurisdictions, it is provided in DTC that the transfer pricing regulations can be extended to enforce such regulation on unrelated party if such an entity is located in a specified territory like tax heaven.”
Referring to the 2008 Global Financial Integrity (GFI) findings as “worrisome”, he said: “There is an unmistakable trend showing that the Indian private sector has shifted away from bank deposits to deposits in OFCs”. As a full member of Paris-based Financial Action Task Force, India was aligning with international tax practices, he said.
Transfer pricing regime
Mr Mitra further explained that the DTC provisions of Advance Pricing Agreement would ensure proper benchmarking and stability in transfer pricing regime.
Wealth tax provisions for specified assets to include deposits in banks located outside India, interest in a foreign trust or anybody (other than foreign company) and any equity or preferential shares held in a controlled foreign company. These steps would ensure proper reporting of assets whether situated in India or outside by the taxpayer and would lead to proper monitoring and analysis of the same.
The reporting requirement has been introduced making it obligatory on the part of all resident assesses to furnish details of their investment and interest in any entity outside India in the form and manner as may be prescribed.
Meanwhile, in a release, FICCI said: “Given FICCI’s roots in nationalism, we are deeply concerned about the potential damage to brand India and the India story due to brazen acts of corruption by a select few”. To preserve India’s robust image and keep the growth story intact, FICCI called for transparency, accountability and probity in our system of governance