Criticism of India’s News Tax Code Unjustified

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Aug. 27 – India’s new tax code changes have led analysts to suggest that this would make the country a less attractive venue for foreign investment, according to The Financial Times.

The draft of the tax code includes such changes as taxing assets regardless of whether investors have realized profits or not and giving tax commissioners more powers in challenging tax treaties.

Critics of India’s tax code overhaul are mistaken, Chris Devonshire-Ellis, managing partner of Dezan Shira & Associates Mumbai told India Briefing. He says:  “Overall, the draft tax code will reduce the amount of corporate income tax to 25 percent from 30 percent. That is obviously to be welcomed. The issue over tax treaties is largely due to the government responding against the stark fact that Mauritius is India’s single largest investor nation. ”

He adds: “That indicates a large degree of Indian domestic businesses taking advantage of Mauritius as an offshore jurisdiction for income that should really fall under the jurisdiction of the Indian state. It signifies a desire to close that loophole, which is to be expected. Concerning the issues of taxes on assets, this applies to specific sectors such as energy, and is not across the board. ”

While Devonshire-Ellis is not in favor this aspect of the draft, he believes that overall, the fact that India is going through its first major tax overhaul in half a century is welcomed.

The draft tax code is part of India’s on-going process of tax reform and development to equip the country with the tax revenue structure it needs to remain globally competitive.

Further Reading
India Releases Draft Tax Code
India Revises Double Tax Avoidance Agreements

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