Improving Taxation Environment: Attracting Foreign Direct Investment
Singh, R. R. | June 2016
Abstract
With opening of the economy in 1991 and subsequent removal of regulatory and trade barriers, India became an attractive investment (Foreign Direct Investment-FDI) destination. A large number of multinationals have established operations in India to utilise the services of available skilled manpower.
Indian tax administration was always perceived to be difficult. The economic liberalisation had created challenges in integrating Indian tax system with the world economy during the adjustment phase. World financial environment had remained depressed since 2008. The actions of the government in the area of taxation laws during 2012 and 2013 with sudden introduction of General Anti –Avoidance Rules (GAAR) including retrospective amendment to law further aggravated the taxation environment specially in the area of international taxation. This badly affected the sentiments of the international investor community. In other words it can be said that the economic liberalization did not match with the tax aggressiveness and that probably led to some major concerns, and impacted ease of doing business. Though the government did take some steps during 2012 and 2013 and further more steps during 2014 and 2015 to soothe the investor sentiment, there are still areas of persisting concern which need to be addressed.
Section one, introduction, broadly deals with the concerns of the multinationals in the area of taxation environment. Section two deals with the genesis of the recent crisis in this area and issues involved such as introduction of GAAR, international taxation, retrospective amendment dispute resolution etc. Section three deals with GAAR. Section four deals with various issues involved in the area of international taxation including Permanent Establishment, attribution of profits, transfer pricing, taxation of Information Technology (IT) and Information Technology enabled Services (ITeS) sectors, Advance Pricing Agreements (APAs) and Safe Harbour Rules. While Section five deals with retrospective amendments to the Income Tax Act and Section six deals with various aspects of dispute resolution, section seven deals with attitude of the tax administration. Section eight deals with the recent steps taken to address the taxation issues and section nine contains the conclusions and the areas that still needs to be addressed.
Citation
Singh, R. R.. 2016. Improving Taxation Environment: Attracting Foreign Direct Investment. © Indian Council for Research on International Economic Relations. http://hdl.handle.net/11540/9100.Keywords
Urban Development Finance
Trade Finance
Small Business Finance
Rural Finance
Roundtable on International Trade and Finance
Regional Development Finance
Public Service Finance
Public Finance
Project Finance
Private Finance
Non Bank Financing
Non-Bank Financial Institutions
Municipal Finance
Local Government Finance
Local Currency Financing
Limited Resource Financing
International Financial Institutions
Infrastructure Financing
Industrial Finance
Government Financial Institutions
Government Finance
Financing of Infrastructure
Financial Sector Development
Financial Regulation
Economic evaluation
Economic Forecast
Resources evaluation
Input output analysis
Cost benefit analysis
Foreign and Domestic Financing
Cybersecurity
Taxation
Public Accounting
National Budget
Municipal Bonds
Local Government
Local Taxes
International Monetary Relations
International Financial Market
International Banking
Central Banks
Business Financing
Capital Resources
Budgetary Policy
Capital Needs
Corporate Divestiture
Capital Instruments
Pension Funds
Insurance Companies
Banks
Digital
Portfolio Management
Fiscal Administration
Economics of Education
Development Banks
Scaling-Up And Evaluation
Results-Based Monitoring And Evaluation
Public Policy Evaluation
Impact Evaluation
Performance Evaluation
Use tax
Taxing power
State of taxation
Tax-sales
Tax revenue estimating
Tax planning
Spendings tax
Special assessments
Tax administration and procedure
Sales tax
Real property and taxation
Progressive taxation
Effect of taxation on land use
Effect of taxation on labor supply
Intergovernmental tax relations
Inheritance and transfer tax
Energy tax
Risk assessment
Economic policy
Economic forecasting
Cost effectiveness
Participatory monitoring and evaluation
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