Finance Commission chairman NK Singh on Monday stressed that the government must complete unfinished tax reforms to improve the woefully inadequate tax buoyancy witnessed in the past one-and-a-half years, while advocating that simple direct tax code should be implemented soon and that the GST Council ought to go to the drawing board to address compliance issues. Singh said that the tax buoyancy should at least be 1.2-1.3 for the country. However, according to an estimate by FE, if the revenue collection trend for the April-September period holds for the entire year, the buoyancy would only be 0.2. This would be the lowest tax buoyancy recorded at least since FY14. The buoyancy, which typically refers to the ratio of tax growth to nominal GDP growth, has been steadily declining from a high of 1.6 in FY16. However, Singh said that recent measures taken by the finance ministry would have multiplier effect in the long term. “We need to see healthy, robust tax buoyancy for which the finance ministry has announced major initiatives, including changes in the GST compliance, which I think will have a multiplier effect.

The government is working towards fully auto-populated income-tax returns. The modified form will likely include information on tax liability on gains from stock trade, dividends from mutual funds and interest earned from saving accounts, according to official sources. The income-tax department has had several rounds of meeting with depositories, mutual funds and banks to ascertain the feasibility of more comprehensive returns. Currently, some returns (ITR-1 and 2) are pre-filled, with information related to the taxpayer and employer, break-up of the salary into taxable component and tax deducted at source (TDS) through Form 16, and the final liability featuring among the entries. While the electronic form gets automatically populated with tax liability on fixed deposit interest as that bank deducts the tax at source, the assessee still has to manually fill in the liability regarding interest earned on saving account as there is no TDS on the same.

Software development is not manufacturing and will not be eligible for the 15% tax rate applicable to new manufacturing entities, a government official said.The government will table a Bill in Parliament in the upcoming winter session to clarify this and other related matters. The Bill will replace its earlier ordinance in September."The amendment Bill will clarify that 15% corporate tax rate is only for new manufacturing entities and that software development is not manufacturing," the official, who is privy to the development, told ET.The amendment comes after industry sought clarity on whether software development could be treated as manufacturing and be eligible for the reduced tax rate. 72101556 On September 20, finance minister Nirmala Sitharaman slashed the corporate tax rate to 22% for companies that do not seek exemptions or incentives, and to 15% — from the current 25% — for new manufacturing companies.

India and Switzerland have expressed satisfaction on the progress made over the past few years in the area of administrative assistance in tax matters, particularly the efforts made by this Alpine country in providing assistance in HSBC cases. This emerged at the meeting between Revenue Secretary, Ajay Bhushan Pandey, and the visiting Switzerland State Secretary for International Finance, Daniela Stoffel, in the Capital on Wednesday. Welcoming the first transmission of financial account information on automatic basis between the two countries in September 2019, the Secretaries reiterated their countries’ commitment to global tax transparency for tackling offshore tax evasion.

In the face of global outrage at the little or no tax paid by some of the world’s largest multinationals, the G20 appointed the Organisation for Economic Co-operation and Development (OECD) a few years ago to design alternatives to end these abuses. In response, on October 9, 2019, the OECD put forward proposals for a new international tax system that may be imposed on the world in the coming decades. We are talking about a major issue. In the US, for example, 60 of the 500 largest firms — including Amazon, Netflix and General Motors — paid no taxes in 2018 despite a cumulative profit of $79 billion. These misappropriations, often legal, are based on complex arrangements but derived from a simple principle.

India’s share of tax from multinational digital companies like Google and Facebook, among others, would be substantially lower than the current mop-up under equalisation levy if the taxation formula suggested in the OECD consultative paper is applied. The OECD formula seeks to distribute ‘residual profit’ among jurisdictions where taxability is established. The government collected about Rs. 900 crore in equalisation levy for FY19. India and other developing countries want that the entire profit of these companies should be in play for taxation. The portion of total profit liable for taxation in a given territory should be proportional to the sales made by the firm within the jurisdiction, an official said. But the consultative paper released by OECD said that the ‘residual profit’ should be apportioned among countries.

The government could boost its revenues by more than Rs 55,000 crore if it implements a task force report that calls for a complete rejig of income tax slabs and capital gains tax regime, two persons familiar with the content of the report said. “There could be an overall gain in revenues if the recommendations are implemented in full,” one of the persons said. The government has begun examining the report of the task force on direct taxes, and it is expected that some its recommendations may find place in the upcoming budget. The report, which is yet to be made public, has suggested a radical shift to taxation approach by suggesting no prosecution or reopening of assessment for people who declare and pay higher income tax for a past period of up to six years with interest and 50 per cent penalty. “It has been seen that taxpayers do not pay higher tax for a past period for fear of reopening of assessment and prosecution,” said the second person cited earlier.

India has sought changes in the Organisation for Economic Cooperation and Development (OECD) proposal on digital taxation, saying it would deny the country its proper share of taxes from multinationals such as Google, Facebook, Uber and Netflix, which generate substantial revenues locally. The government has proposed a more balanced principle for the taxation of such companies based on place of revenue generation. “We want a fair share in revenues that accrue to the company from the country,” said a government official aware of the development. India has submitted its concerns to the body. The OECD had on October 9 released a draft on taxing digital companies for public comment. Discussions on the proposal are to be held on November 21-22. All countries have to agree for the rules to be enforced.

India and the US on Friday committed to enhance cooperation in tackling money laundering and combating the financing of terrorism. In a joint statement issued after the seventh Meeting of the Economic and Financial Partnership (EFP), the two countries noted that their relationship has strengthened over time as both sides have developed a holistic approach on tackling money laundering and combating the financing of terrorism (AML/CFT), which are the issues of shared concern. The Indian delegation was led by Nirmala Sitharaman, Minister of Finance and the US side was led by Steven Mnuchin, the US Secretary of the Treasury. "Our cooperation includes but is not limited to, information exchanges to combat global terrorist financing and to support the designation of specific terrorist facilitators and financiers, coordinating on AML/CFT and maintaining the integrity of the Financial Action Task Force (FATF) global standards for AML/CFT," the statement said.

Abolishing dividend distribution tax, securities transaction tax and long-term capital gains tax on shares could burn a Rs 80,000 crore hole in tax revenue, making it difficult for the government to offer any immediate concessions. The government has already slashed corporate tax rates, foregoing Rs 1.45 lakh crore, and more tax concessions will have to be made up for by increasing income tax on the super-rich or cutting welfare spending, both of which are not feasible, a government official aware of the matter told ET. The benchmark BSE Sensex crossed the 40,000 mark on Wednesday, building on the big gains of Tuesday after reports that the government may abolish the three equity transaction-related taxes. There are limited options to absorb the revenue loss if these taxes are abolished, said the official, adding that welfare expenditure for schemes such as Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and MGNREGS cannot be cut, given weak demand and rural stress. The Reserve Bank of India said the country’s GDP growth will slow to 6.1% this year from 6.8% last year.

The government is unlikely to moderate personal income tax rates for the rich due to fiscal stress on account of lower tax realisation amid slowdown in the economy, sources said.

Abolishing dividend distribution tax, securities transaction tax and long-term capital gains tax on shares could burn a Rs 80,000 crore hole in tax revenue, making it difficult for the government to offer any immediate concessions.

The government is not considering any gold amnesty scheme as part of efforts to unearth unaccounted wealth stashed in the form of yellow metal, official sources said on Thursday.

The government is considering a revamp of the income tax structure on equities to boost investor sentiment, television channel CNBC Awaaz reported, citing sources. The existing long term capital gains (LTCG) tax, the securities transaction tax (STT) and dividend distribution tax (DTT) are under review, the report said. This comes in the wake of a sharp cut in corporate tax rates last month. The Sensex was up 600 points in afternoon trade.

The government has virtually ruled out a reduction in personal income tax, including in the forthcoming Budget, with well-placed sources citing examples of higher rates in several countries such as China, the US and the UK, apart from the lack of fiscal space to reduce the levy.

Government is considering tax relief for individuals as it looks at measures to accelerate consumer demand and boost economic growth, people with direct knowledge of the matter said. Prime Minister Narendra Modi’s government is mulling a proposal to hike the taxable income limits, especially the 1 million rupee slab, which attracts a 30% rate at present, the people said, asking not to be identified as the discussions are private.

India is considering tax relief for individuals as it looks at measures to accelerate consumer demand and boost economic growth, people with direct knowledge of the matter said. Prime Minister Narendra Modi’s government is mulling a proposal to hike the taxable income limits, especially the Rs 10 lakh slab, which attracts a 30% rate at present, the people said, asking not to be identified as the discussions are private. The move will be accompanied by scrapping some tax breaks, including the one offered on house rent payments and interest earned on some bank deposits.

The government has been able to recover just 15 per cent of the total outstanding arrears of corporate tax of Rs 20,78,267 crores in the last five years. The data presented by the Ministry of Corporate Affairs to the Lok Sabha while replying to a written question in July this year, reveals that arrears of Rs 3,19,248 crore have been recovered from defaulters. Data shows that in the last three fiscals, the government was unable to collect even 20 per cent of the corporate tax arrears annually.

A Gujarat-based listed conglomerate that merged one of its companies with another — a smaller unit was taken over by the umbrella group entity — is now under the income tax lens. While around 60% of the cost paid to the smaller entity was toward plant, machinery and land, the rest was an intangible asset later listed on financial statements as goodwill. The tax department is of the view that the group orchestrated the restructuring exercise merely to escape taxes — and not just the Gujarat conglomerate. Hundreds of companies that had undertaken restructuring or mergers within the group are under scrutiny for “artificially” creating goodwill merely to lower their tax outgo.

The Bombay High Court has directed the income tax department to refund Rs 788.39 crore to Vodafone Idea Ltd. (VIL) within three weeks, bringing some relief to the loss-making telecom operator which has also sought the government’s help to ease its financial stress. The refund order – more than Rs 630 crore due to Vodafone India and over Rs 150 crore to Idea Cellular – was issued by the court last week. The tussle between the telco – formed following the August 2018 merger of Vodafone Idea and Idea Cellular – and the IT department erupted from the assessment order for 2017-2018 financial year, when the two companies together suffered losses of more than Rs 6,600 crore. The IT department had held back the refund on the grounds that they had declared income of nearly Rs 287 crore during the assessment year 2016-2017 but incurred a big loss the next year, and therefore their returns for 2017-2018 should be investigated.