| Taxmen
get more powers to crack the whip on defaulters
with overseas assets |
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Taxmen in India will soon be
able to crack the whip on foreign companies defaulting
on tax payments but holding assets in Pakistan
and some other SAARC countries. They can now recover
taxes with the assistance of their counterparts
in these regions.
'Collection assistance' is
one of the most significant provisions included
in the first-ever multilateral agreement on avoidance
of double taxation and mutual administrative assistance
finalised among SAARC countries in Islamabad recently.
The agreement, which was drafted by an expert
group, will be formally signed at the SAARC summit
in Dacca next year.
India's income tax laws
empower assessing officers (AO) to attach any
property belonging to the assessee to protect
revenue interests in certain cases. But provisional
attachment is possible only if the property is
within India. Tax recovery, however, is problematic
if the assessee- on whom the demand is raised-
has property outside India. The incorporation
of the collection assistance clause will enable
revenue authorities in jurisdictions where the
assessee has property to step in and ensure that
the tax is recovered.
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Our Say |
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| Apart
from just the collection assistance
clause, the multilateral tax treaty
as a whole, could definitely give added
advantages to companies operating in
this region, given the increasing focus
on economic co-operation among SAARC
nations. The idea is to bolster the
flow of capital, investment and services
in the region. Such an agreement could
also help curb the practice of treaty
shopping. A consensus has been forged
on having a separate article on exchange
of information about tax payers in the
region.
It
is worth noting however that the agreement
does not include uniform lower withholding
tax rates- or the tax deducted at source
on income from dividends, interest,
royalty and fee for technical services-
among SAARC members.
Among
the SAARC members, India has double
taxation avoidance treaties with Bangladesh
and Sri Lanka. It does not have bilateral
tax treaties with Pakistan, Bhutan and
the Maldives. |
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| Banking
on Singapore!! |
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Indian banks will now be able
to access the retail market in Singapore with
national status accorded to banks setting up shop
there. Many Indian banks have sought to enhance
their overseas presence, but are facing bottlenecks
in terms of regulatory issues. The government
of Singapore expects that the bilateral agreement,
the Comprehensive Economic Corporation Agreement,
signed between India and Singapore, will ease
these problems.
The Singapore Stock Exchange
(SSE) is also pushing for linkages with the National
Stock Exchange (NSE) and the Bombay Stock Exchange
(BSE). This will facilitate retail investors in
Singapore to invest in the Indian capital market.
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Our Say |
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| While
foreign banks have been given greater
freedom and operational profitability
and also allowed to increase their footprint
in India, Indian banks have been unable
to operate in developed countries such
as France, the UK or the US. In addition
East Asian banks are also considered
quite open, but only towards banks from
the West, not Indian banks. This move
will definitely benefit Indian banks
wanting to tap the overseas banking
markets.
On the other hand, the SSE’s proposed
linkage with the BSE and NSE will facilitate
bilateral investments between retail
investors in Singapore and India. The
SSE has already tied up with the Australian
Stock Exchange and wants to replicate
the model in India.
The idea is when capital account convertibility
becomes a reality in India, Indian retail
investors can invest in Singapore stocks.
Today, they face several restrictions
despite the partial opening up of the
sector, such as investing only up to
$25,000 a year abroad. In effect while
the Indian government is investing abroad,
retail Indian investors are not.
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