The UN-crafted sustainable development goals (SDGs) and Paris Agreement on Climate Change are set to alter tax revenue flows in varied ways. The alteration would result from changes in both the taxation and non-tariff norms governing production and usage of different materials. 

The impact of alteration would perhaps be the most significant in the domain of fossil fuels and their derivatives notably plastics. Certain countries have either levied taxes or are likely to do so in the coming years to curb use of plastics and to facilitate their recycling. Most countries have already imposed non-tax regulations to discourage plastics usage, thereby impacting tax revenues. 

The restrictions on consumption of one material facilitate increase in the demand for competing materials. In the case of plastics, the substitutes are aplenty – paper, natural fibres-derived materials, wood and aluminium, depending on the application. 

Plastics are largely produced from intermediates derived from oil, gas and coal. The suppression in the demand for plastics would thus ultimately impact the entire value chain of fossil fuels. The revenue impact would also be influenced by mandated shift in electricity generation from fossils to renewable sources of energy. Same trend applies to regulatory shifts in petrol & diesel-driven vehicles to electricity-powered ones.  

This issue has been aptly flagged in a White Paper titled ‘Thinking Strategically: Using Resource Revenues to Invest in a Sustainable Future’ released by World Economic Forum (WEF) on 21 February 2019. 

 (Image Courtesy: loksabha.nic.in)

 

Indian democracy touched a new low with the Promulgation of four ordinances post early closure of budget session of Parliament. There would have been no need for these temporary laws had the Parliament functioned till February-end, instead of ending budget session on 13th February. 

The four transient laws are: 1) The Companies (Second Amendment) Ordinance 2019, 2) Muslim Women (Protection of Rights on Marriage) Second Ordinance, 2019 (popularly known as triple talaq law), 3) Indian Medical Council (Amendment) Second Ordinance, 2019 & 4) Banning of Unregulated Deposit Schemes Ordinance, 2019.

The new low is characterized by the Executive (the Government) usurping the powers of the Legislature (Parliament in this case) through repeated re-promulgation of ordinances.

Of the four ordinances notified on 21st February, the first three are re-promulgations for the third time in each case. All four would cease to be laws if the BJP fails to form the Government after the forthcoming Lok Sabha polls! 

 (Edited Image Courtesy: OECD Brochure)

 

Corporate income tax (CIT) reforms have lately come under intense gaze from different quarter across the world. There is near-unanimity among diverse stakeholders that the present CIT system is outdated. It has to be replaced with a new one. 

Many consider Base Erosion and Profit Shifting (BEPS) as patchwork solution to the problems caused by the existing system. Some are skeptical about the emerging BEPS Version.2. 

The entities chipping into the reforms broth include International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), revenue administrations, academics and leading NGOs. 

The last group is also operating collectively under The Independent Commission for the Reform of International Corporate Taxation (ICRICT), a group of certain renowned economists formed in 2015.

One can divide reforms into two categories: 1) the reforms within the existing CIT system that have been accelerated by several nations. Apart from rate reductions, expansion of CIT base, such reforms have seen elimination of minimum alternate tax in the United States & Belgium. The countries spearing reforms have also adopted new approaches towards taxation of multinationals. 

2) The 2nd set of reforms call for reinventing the entire CIT framework. These seek a new format for taxing corporate income with few alternatives on the agenda.