The chamber has noted that domestic expenditure must rise for the economy to come out of the slow growth rut. To achieve this, the chamber has said, savers must be convinced to invest and consumption must be encouraged.The chamber says that certain key priorities must be emphasised, one of which is encouragement of foreign direct investment. The government needs to have a longer-term strategy to create domestic wealth which in turn will produce taxes, consequently assisting in financing infrastructure as well as reducing internal and external debt, the chamber has said.

The chamber has called for reduction of customs duty. "The reduction as per WTO commitment will further increase India's internationaltrade for goods and service," notes the chamber, and says that these changes raise a number of global issues, which have tax implications, such as determination of transfer pricing guidelines for tax purposes in the case of cross border transactions, joint ventures and transfer of technology, tax treatment of electronic trade transactions, data and knowledge using global telecommunication linkages between different countries, participating in joint projects by tax payers of two countries, setting up of offshore branches and depots etc.

The chamber notes that the existing income tax law does not have clear guidelines on tax treatment of many such developments. This may lead to tax disputes and hamper economic growth, it predicts.The chamber suggests that a special cell similar to the commerce ministry's special cell to implement the Gatt deals should be set up on global tax issues, which should have frequent interaction with trade and industry while finalising tax guidelines. Some tax issues which requireimmediate attention have also been stated in the memorandum.

The chamber has also noted that tax laws and procedures should facilitate the restructuring of businesses through merging, demerging or spinning off of particular business activities which are non-core, or entry into joint ventures for technology support. This should be done by making the laws and procedures pragmatic and clear, says the chamber.

It also points out that the government is changing some of the business legislations in the context of liberalisation such as Fera and company law. The tax issues arising out of such changes need to be addressed urgently, such as tax treatment on buyback of shares, timing and the method of computing tax payable on issue of sweat equity (ESOP and venture capital), restructuring of foreign subsidiaries and holding companies etc. Indian companies are also required to ensure that their electronic equipment and computers are Y2K compliant. Clear guidelines for tax treatment of such costs need to be provided.Similarly, the tax laws should recognise restructuring of insurance sector and pension funds and suitably modify the relevant tax provisions, says the chamber.

The chamber says it is heartening to note that the government has implemented a policy for lower tax rate with wider tax base which not only increases the tax revenue due to better tax compliance but also, it says, ensures sustained buoyancy in tax collections and provides a much stronger base. The chamber has accordingly made further suggestions to broaden the tax base in the memorandum.

The chamber has stressed on the directional change required in tax incentives to utilise savings for infrastructure development. "There is an urgent need to improve the country's physical infrastructure for sustainable economic growth, this requires a large investment by public and private sectors," says the chamber. The chamber recommends that tax rebate under Section 88 should be limited to investment in long-term financial instruments which are generally usedfor infrastructure development, for example, infrastructure bonds, public provident fund, provident fund etc. The limit, says the chamber, should be increased to Rs 1 lakh from Rs 60,000 at present.

Companies should be encouraged to set up pension funds, says the chamber, for which one combined limit should be prescribed under Section 36 of the Income Tax Act for the contribution to employees' funds instead of separate three sub-limits currently prescribed under rules 87 and 103 of the Income Tax rules for PF, pension and gratuity funds.

This will provide flexibility to employers to contribute more towards pension fund within the same overall limit, says the chamber.