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Unpredictable tax ruling is the biggest challenge
By siliconindia
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Friday, 14 December 2007, 20:30 IST
New Delhi: Tax risk is the fourth most important risk among a variety of risks faced by the corporate companies in India. The corporates consider unpredictable tax rulings by authorities as the biggest challenge for the tax administration, states the latest survey on Tax Risks in India by global taxation consultancy firm PricewaterhouseCoopers.
"Corporates, especially MNCs, believe that unpredictable rulings by tax administration are the most important reasons leading to tax risk challenges, while lack of clarity in tax laws is a major concern for Indian firms," says the survey conducted on 80 companies including more than 50 MNCs.
Tax risk arises due to a number of factors, including uncertainty related to tax laws, changing legislations, differences in interpretation of laws and heightened scrutiny by tax authorities.
Lengthy process of dispute resolution and possibility of image damage are other major reasons for perceived tax risks of corporate entities, said Ketan Dalal, Executive Director, PwC, while releasing the survey here on Thursday.
He said the country needs to restructure tax administration and improve dispute resolution mechanism, in the absence of which litigations take on an average 12-15 years to settle. Among various taxes, income tax remained on top of corporate agenda because of its direct impact on the bottom-line of a company, he added.
The other important tax which occupied the attention of the corporates was service tax, which is a relatively new tax for the companies as well as for the administration, he said. Interestingly, corporates also perceived an image dent on account of non-compliance as more damaging than loss of investors confidence or financial penalties in the event of a default.