FICCI recommends fiscal bundle to encourage investment

Sunday, 25 November 2007, 08:00 Hrs
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New Delhi: A leading industry body has recommended an eight-point financial package to encourage investments flowing in and out of the country.

According to Federation of Indian Chambers of Commerce and Industry (Ficci), the Indian economy is likely to have a foreign trade turnover of over $350 billion (13.9 trillion) and foreign investment inflows of $30 billion (1.2 trillion).

Incomes earned by overseas subsidiaries of Indian companies should be exempted from all taxes to encourage them to repatriate their earnings into India, the industry body recommended.

Currently, a person is eligible for tax credit paid outside India with respect to doubly taxed income. This is equivalent to the tax at Indian rates or rates of the said country, whichever is lower.

Ficci has recommended consolidating such tax liability.

In cases when tax paid to the foreign country on income from outside sources is more than what it would be payable in India, the assessed should be eligible for tax credit deduction in respect of the excess part of the tax liability as well, like other countries.

Ficci further suggested that the dividend distribution tax be brought under the Double Taxation Avoidance Agreement (DTAA) umbrella.

This would enable overseas holding companies with Indian subsidiaries to offset distribution taxes paid in India from tax payable by them in their respective countries.

The body has also urged the government to follow the example of other countries such as the Netherlands, Singapore, Luxembourg, Ireland, Spain and Austria, who have redesigned their taxation laws to attract outbound investments.

The current provisions require that the taxpayer take arithmetic means of prices. This, Ficci says, should be modified to use other statistical methods such as median of prices.

It also suggested measures to ensure that fringe benefit tax on employee stock option scheme is eligible for tax credits under the DTAA.

FICCI has also urged proper and timely implementation of an efficient goods and services tax regime that would eliminate distortions and lower taxpayers' burden.
Source: IANS
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