Era of tax avoidance to minimise liability over, warns CBDT
NEW DELHI: Cautioning that era of tax avoidance is over, CBDT Chairperson Anita Kapur today said that action would be taken against those who try to organise businesses with a view to minimise liability.
Addressing CII’s global tax summit, Kapur also said that for companies with low profits, average tax rate is higher under the current regime of exemptions. Whereas bigger companies get the advantage of exemptions.
“The era of tax avoidance, am not talking about evasion, in the garb of minimising taxes, is over. And I am very sure that people who are still bent upon organising their businesses in a manner that use all kinds of tools to avoid taxes, are going to be outliers in the system,” she said.
Kapur said companies have to pay the government where actually a business has taken place.
“Tax is in the board rooms. Tax is no longer in the offices of the CFOs, because your brand will suffer if you get a stigma of being a tax avoider,” Kapur said.
Assuring taxpayers of all fairness in processes and compliance, the Central Board of Direct Taxes (CBDT) chief said the department will also need to gear up to take stern action against tax avoidance and evasion as they spoil the compliance regime.
She said the tax rates for corporates would be brought down and exemptions would be phased out gradually.
Kapur also said the department has asked think tanks NIPFP and ICRIER to identify the tax gap in the system. “NIPFP study showed us our missing tax population which has an income of Rs 4 lakh (annually). We don’t have large taxpayers missing from our base, they are in the base but they are understating their income.
“People with large income are there with us, and we just need to concentrate on seeing that they report their correct income, they don’t under report their income,” Kapur said.
She said tax laws need to be simplified because studies show that people do not want to pay taxes for two reasons — complex laws and tax administration not facilitating compliance.
Highlighting the importance of OECD’s recent BEPS norms, Kapur said India is no longer a minority voice globally for ensuring that taxes are paid where the income is generated.
“In India when the tax administration we used to say please pay your taxes because you have added value in India, we were a minority voice. With BEPS project, our concerns have been heard and we are no longer the minority voice,” Kapur said.
The OECD/G20 project on BEPS provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to artificially shift to low or no-tax environments, where little or no economic activity takes place.
