"GAAR framed keeping in mind investments "
Early clarification of the General Anti-Avoidance Rules (GAAR) framework has been prepared on a global comparative situation and keeping in mind need of the investments will instill the confidence amongst the investors, said a top official on Friday. "We have worked like a technical tax committee and saw the GAAR framework in a comparative situation with rest of the world as well as in context that we need investments in India at this stage to get out of recession," said Dr. Parthasarthi Shome, chairman of the Prime Minister's Committee on GAAR while addressing a national seminar on "Trends and Recent Developments in Taxation," organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in New Delhi. Shome, who is also Professor at Indian Council for Research on International Economic Relations (ICRIER), said that GAAR has provided much needed clarity on certain matters and with it major policies can come relatively easily as the government is holding discussion on luring investments in retail and other significant sectors. "The whole process of openness and confidence-building came through as we held discussions with all the stakeholders and I think the government would soon come out with a decision," said Shome while responding to a question on the structure of GAAR provisions, the government is likely to come out with asked by Venugopal Dhoot, past-president, ASSOCHAM and managing director, Videocon Industries Limited. Talking about need for reforms in various areas, Shome said, "Agriculture is one sector which requires intensive and deep structural reforms as its proportion is decreasing." "A right kind of business environment resulting in a strong private sector savings growth rate together with discussion and openness on a conducive tax policy, need for large taxpayer units, speedy reforms in computerisation and data mining based on returns filed are certain key measures to get back to a higher rate of growth," suggested Shome.
"To overcome the challenge of getting back to a higher growth rate, tax has to be the fall guy and a right climate for that can be prepared by creating an environment of recognising taxpayers as stakeholders for consultations, openness for a conducive tax policy and to make major tax policy changes."
Talking about the role of the productive sector, Shome said: "It is for the production to actually garner and negotiate collective bargain in such a way that best results are obtained for the industry as a whole rather than individually oriented or sub-group oriented tax incentives."
While sharing his views on the administration side, the chairman said, "There is a need to divide the large tax payer units sector-wise so that the tax administration understands how a particular sector is working in terms of business cycle and in terms of medium term so that the administration can take better measures."
Apart from large tax paying units, Shome also said there are certain anomalies in the process of computerisation and there is need to speed up the reforms process in this regard otherwise the advantages of CPC would not be perceived completely.
Talking about the need for new data and new information for tax administration, Shome said, "Data mining for tax administration analysis and policy making would yield advantages and there is a need to employ these kinds of methods as many developed and developing countries are also implementing these things."
Sharing his views on need for customer focus in tax administration, Shome said, "Adversarial relationship between taxpayers and tax authorities is a significant task and we need to move into that direction."
He also stressed upon holding continuous customer based meetings at different levels on the sector.
Further talking on the administration aspect, Shome said that tax administration is undertaking a major study on risk, uncertainty and compliance cost. "There is a need for a compliance cost analysis for impact assessments on businesses on every tax change and the tax administration does need to carry out this kind of exercise."
Amid others who spoke during the ASSOCHAM seminar included Rahul Garg, co-chairman, ASSOCHAM National Council on Direct Taxes and D.S. Rawat, secretary general.