Tax authorities should adopt bilateral APAs: PwC |
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September, 01st 2010 |
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Cabinet approval of the Direct Taxes Code (DTC) Bill will witness a step towards a positive development in Transfer Pricing, a major concern for multinational companies operating in India."DTC will bring some good news on transfer pricing issues and with Cabinet approval we hope that the proposed Advance Pricing Agreements (APA) will take shape in due course," PricewaterhouseCoopers (PwC) associated director-transfer pricing said.Transfer pricing means the adjustment of charges done between related parties for goods, services, or use of property."DTC recognises need for APA, but it does not mention whether it will be unilateral or bilateral agreement. Bilateral APA will be more helpful," he said.In developed countries, such agreements either unilateral or bilateral, were entered into by taxpayers with one or more national tax authorities in advance for usually between 3-5 years, PwC national leader on transfer pricing Rahul K Mitra said.Bilateral agreements were struck between tax authorities of countries and the unilateral one between an individual company and the tax authority of a country in which it was operating.APAs are the agreement done between the taxing authority and the tax payer for a set of transactions.APAs were treated as an excellent tool to achieve certainty on transfer pricing matters as would do away with the current system scrutiny for all tranactions above a threshold limit of Rs 15 crore.Transfer pricing, simply put, was the art of pricing cross border transfer of goods and services that took place between companies belonging to the same multinational group.More than 60 per cent of global trade took place between related parties (companies within the same group).Till 2006-07 an estimated Rs 30,000 crore was involved in transfer pricing adjustments. |
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Tax authorities should adopt bilateral APAs: PwC
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Direct tax bill diluted to please industry |
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September, 01st 2010 |
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The Direct Tax Code (DTC) Bill, which was tabled in Parliament on Monday, was a diluted version of the original draft, since the government took into account over 1,600 comments on the proposed law, revenue secretary Sunil Mitra said on Tuesday. These comments were nothing but complaints, and some aspects of the original act had left the industry complaining, while some public sector undertakings (PSUs) would have been unduly taxed, Mitra told Media.He was in the city to attend the inaugural function of a foundation batch of civil service probationers held at the National Academy of Direct Taxes ( NADT).However, Mitra also admitted that things would have been much different had the Goods and Services Tax (GST) got the go-ahead too. GST would have compensated for the loss of direct taxes, as it would have led to better compliance on the indirect tax front, he said."The GST regime would have prompted higher compliance by traders in order to avail the input credit available at every stage, thus increasing the tax pool in totality.Unfortunately, there was no consensus among the states for a constitutional amendment for the new tax regime. The government will be losing around 55,000 crore by way of direct tax revenue on account of the new tax code," said the secretary.On the minimum alternative tax (MAT) being kept on book profits, the secretary said an asset-based MAT would have left industries complaining. Moreover, there are several PSUs which have a huge asset base, but are reeling under losses. An asset-based MAT would have taxed such entities, he said.Mitra said the 2014 deadline for profit-based tax exemptions for units in the special economic zones ( SEZs) will be a major tax-saver for the government. In the previous budget, the government took a hit of 80,000 crore on account of such exemptions, of which 25,000 crore accounts for exemptions on advance depreciation. It is expected the DTC will gradually reduce the loss by 55,000 crore, as the advance deprecation concession will remain in the asset-based exemption, which will be there after deadline.The profit-based tax exemption has led to tax dodging by several unscrupulous corporates, who show the profits of non-exempt entities in the books of exempt entities. Asset-based exemption will rather help in creating capital assets, he said. |
DIRECT TAX CODE - (03.09.10) |
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