- Details
-
Created on Saturday, 14 January 2017 14:34
-
Hits: 5075
Botched Demonetization of high denomination notes in
India &
Venezuela should spur development of a zero-disruptive global strategy to tackle tax-evaded income and bribe money.
The strategy should be such that it complements growth of both direct and indirect taxes. It should discard blind zeal for increase in direct taxes that adversely affects collection of indirect taxes as has happened in India. Demonetization should not let monetary policy overshadow the growth-stimulating fiscal policy.
Even in normal circumstances, the tax policy experts should always strive for an optimal mix of direct and indirect taxes that contributes maximum to economic growth & overall revenue buoyancy. Compartmentalized focus on direct taxes as is evident under demonetization is shortsightedness.
It is here pertinent to quote the findings of a research paper captioned ‘The growth trade-off between direct and indirect taxes in South Africa: Evidence from a STR (smooth transition regression) model’ authored by Economist Andrew Phiri in February 2016.
The Paper says: “Direct and indirect taxes are only significantly related with economic growth when the indirect tax-growth ratio is below a threshold of 10.24 percent. Below this threshold, we observe that indirect taxes are positively related with economic growth whilst direct taxes adversely affect growth. Moreover, it is within this lower regime that we find resources collected by government can be efficiently used and that the labour growth variable has a positive effect on economic growth.”
The Paper continues: “By policy implication this presents a case for fiscal authorities to exploit the nonlinear tax-growth relationship to their advantage by specifically exploiting the positive relationship found between indirect taxes and economic growth below the established threshold. This, in turn, would entail a gradual shift of reliance in collecting government revenue from direct taxes to indirect taxes”.
Read more: Demonetization Hacks Direct-Indirect Taxes Synergy
- Details
-
Created on Thursday, 24 November 2016 03:29
-
Hits: 4050
European Union (EU), Australia and the United Kingdom (in Brexit mode) are pitching for BEPS+ initiative in the realm of tax transparency. This marks a new milestone in enhanced corporate governance.
They have separately unveiled plans to goad large multinational corporations/enterprises (MNCs/MNEs) to disclose to public a big & complete picture about taxes they pay in different countries. And MNCs in Australia are already queuing up to declare their resolve to write annual ‘taxes paid’ report for public consideration.
MNCs would also have to disclose certain other information about their operations such as how many persons they employ in each country and their accumulated earnings.
This transparency initiative is bound to enliven public vigil. It would enrich public discourse on aggressive tax planning and tax avoidance resorted to by MNCs – an issue that has been probed, re-probed and analyzed intensely in the West over the last five years.
As put by Craig Marston of KPMG, “The global tax transparency agenda now appears unstoppable. Australia has embraced this agenda. Fuelled by Australia’s BEPS leadership aspirations, poorly informed Senators and the Panama Papers and other revelations, this agenda will continue to be pushed. Existing norms of taxpayer confidentiality and commercial-in-confidence will continue to be overtaken by the public’s demand for confidence that companies are paying their ‘fair share’.”
Read more: OECD/G20 Should Standardize Emerging Tax Transparency Code (TTC)
- Details
-
Created on Sunday, 04 September 2016 14:28
-
Hits: 4600
(Edited Image Courtesy: OECD)
Inclusivity is the new mantra for entities pedalling tax reforms at the global level. G20, Organisation for Economic Co-operation and Development (OECD) & other global entities are harping on the mantra to lure the developing countries into tax reforms net.
If these countries’ initial response is any indication, the strategy to make tax reforms acceptable to all might well become a runaway success. Many developing nations hitched to the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) at its first two-day meeting ending 1 July 2016 held at Kyoto in Japan.
According to OECD Secretary-General (SG) report to G20 Finance Ministers (FMs) who met in China during July, “In addition to the 46 OECD members, OECD accession countries and G20 members, 39 additional countries and jurisdictions have now joined the G20/OECD Inclusive Framework on BEPS, committed to the BEPS package and participating on an equal footing.”
This brings the numbers of members in the BEPS Project to 85, with a further 19 countries and jurisdictions that attended the inaugural meeting in Kyoto, and are likely to join the Inclusive Framework by year end.
Read more: OECD/G20 duo Enhances BEPS Appeal by Flaunting Inclusiveness
- Details
-
Created on Wednesday, 25 May 2016 14:30
-
Hits: 4079
(Image Courtesy:WTO)
The world’s tax system revolves between WTO and OECD just as the earth rotates on an axis between the North and South poles. Well, something on these lines might emerge as staple text in the economics books for schools in the coming years.
The basis for this visualization is the de facto emergence of World Trade Organization (WTO) as World Tax Organization (WTaxO) for indirect taxes over the last two decades. Similarly, the Organization for Economic Cooperation and Development (OECD) is coming in full bloom as the informal WTaxO for direct taxes.
This visualization is also influenced by two new developments. First, a detailed paper titled ‘Is the WTO a World Tax Organization? A Primer on WTO Rules for Tax Policymakers’ issued by International Monetary Fund (IMF) in March 2016 for the benefit of revenue administrations. The Primer “examines the extent to which World Trade Organization (WTO) rules impinge on policymakers’ freedom to formulate tax policies” including the ones relating to a few segments of direct taxes.
Second, the title of the World Bank’s conference -‘Winning the Tax Wars: Global Solutions for Developing Countries’ to be held during 23-24 May 2016 at Washington. The conference’s one session is captioned ‘Tax Competition, Tax Coordination and Tax Cooperation in a Globalized World’.
Read more: No Alternative to Taxation Spinning on WTO-OECD axis in Sight
