Budget to nudge I-T regime closer to DTC

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Gireesh Chandra Prasad: New Delhi, Feb 06 2013, 02:05 IST

General Anti-Avoidance Rules and the provision for multinationals to strike a pact with tax authorities on the way they price their cross-border trade within the group to avoid transfer pricing disputes have already been legislated. Other concepts outlined in the code such as Controlled Foreign Corporation (CFC) rules meant to tax the non-repatriated profits of Indian companies’ overseas subsidiaries and branch profit tax (BPT) targeting the permanent establishments of foreign companies here would need clarifications and some relaxation before their introduction. Some analysts believe finance minister P Chidambaram might address these concerns in the coming Budget, while there is also a view that the government might wait till a formal position is taken on the DTC before CFC and BPT concepts are introduced.

The industry wants the scope of CFC provisions to be narrower, limited to one level of overseas subsidiaries and credits to be allowed on the taxes paid by the foreign subsidiary abroad. DTC had proposed a 15% BPT in lieu of a reduction in income tax rate for foreign companies from 42% to 30%.

Chidambaram’s advisor Parthasarthy Shome had said last week that the ministry would increasingly follow the approach of looking at contentious tax matters from a global perspective, even as New Delhi strives to revive investor sentiment. Chidambaram on Tuesday urged his officers to follow a friendly approach, which would enhance tax compliance. “As we go forward, we should rely more on technology, non-intrusive intelligence gathering and a non-adversarial tax administration,” Chidambaram said while addressing officials

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