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- Created on 03 December 2022
Goods and Services Tax (GST) has the potential of being a cornucopia of goodies for all stakeholders. But it requires an innovative constitutional makeover in the true spirit of cooperative federalism. (This article is excerpted from '5 years of GST -The buggy Chugs on!' It is special publication from TIOL Knowledge Foundation. It was released during TIOL Tax Congress held during 7-8 November 2022.)
- Created on 28 June 2022
(Image Courtesy: The United Nations)
The lengthening Russia-Ukraine War (RUW) is churning fiscal dynamics across the world. RUW has thus put all stakeholders in the risks-ball gazing mode.
Tax administrations are worried over the fall in revenue and changing revenue-mix due to RUW flux. Simultaneously, they have started levying new taxes such as windfall profit tax on energy companies in certain European countries. Others are toying with idea of new taxes such as a tax on Russian crude exports to give teeth to Western sanctions.
As put by OECD Economic Outlook dated 8th June 2022, “Over the medium and long term, the conflict in Ukraine is raising new fiscal priorities and thus reinforcing the need to change the composition of the public finances. In Europe, many countries are planning to increase expenditure on defence”.
It observes: “In addition, the goal of reducing reliance on fossil fuel supplies from Russia has lent new urgency to investments in clean energy and energy efficiency”.
According to a recent policy paper authored by two experts from Belgium-based think-tank, Bruegel, “For Europe, the war in Ukraine is a first-order economic shock”. Apart from the expenditure on welfare of refugees, Europe is also chipping in military aid to Ukraine. It also has to cope with inflation and its impact on national income.
Discussing tax versus debt as means for managing economic challenges, Bruegel Paper says: “On political economy grounds, the notion of a war tax – a ‘Putin tax’, as President Biden has called it in the United States, although he was referring to the decrease in real income rather than an explicit tax – may be less unpopular than in other circumstances and underscore the point that contrary to current perceptions in Western Europe a war, even an economic war, is not free”.
Read more: Russia-Ukraine War Rocks Taxation Domain Across The World
- Created on 18 July 2021
(Image Courtesy: ioc.unesco.org)
It is time to straighten out the idiom – “Heads I win; tails you lose”. This expression should now be reworded as: Head I win; tails I win too in the global taxation arena. The trigger for this forthright message is the Group of seven rich countries (G7’s) latest success to revise rules of the game in globalized economy to suit its interests.
The G7 oversaw Organisation for Economic Co-operation and Development (OECD) into clinching a global lop-sided tax reforms pact on 1st July 2021. Lop-sided because it is silent on certain developing countries’ 15-years quest to levy customs duty on digital transmission of specified products.
The dichotomy in reforming global direct taxes and indirect taxes has become sharper and alarming after this agreement. More on this delayed indirect taxation reforms a bit later.
The agreement, among other things, moots 15% global minimum corporate tax (GMCT) on multinational Corporations (MNCs) of specified size in e-commerce domain. The preliminary pact is titled ‘Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalisation of the Economy’.
Read more: OECD’s Double Standards on Race To Bottom on Direct & Indirect taxes
- Created on 09 February 2020
(Edited Image. Courtesy: incometaxindia.gov.in )
How to avoid messing up reforms & check slowing down of a booming economy? If an international study on this issue is written, Indian taxation reforms would figure in it prominently. And evidence on this count especially on the big-bang goods and service tax (GST) keeps piling up.
A case in point is Indian Railways, the largest departmental enterprise. It is now struggling to replace more than 410 existing contracts with new ones (novation) to achieve tax efficiency with help of its GST consultant. Corporates of all sizes from different sectors are grappling with one GST issue or the other.
Another case in point is cautionary insight on GST & other taxes reforms issued by 15th Finance Commission (FC). It is a constitutional body constituted every five years to recommend distribution of divisible taxes between the Central and State (provincial) governments. Factor in too the Central Government's Budget for financial year 2020-21 that has, among other thing, hinted at fresh tinkering with GST rates.
Before elaborating on GST flux & resulting uncertainty, consider the fact that the outcome of all taxation reforms since 1991 is nothing to crow about if the tax revenue is measured as a percentage of gross domestic product (GDP). FC has pointed out that combined tax revenue of central and state governments has largely stagnated at 17.5% of the GDP since the early 1990s. This level is “far below India's estimated tax capacity”, it says. “In contrast to India, tax revenue has been rising in other emerging markets”.
