OECD reforms to end tax avoidance era for corporates, says CBDT Chief Anita Kapur
NEW DELHI: The chief of India’s apex direct taxes body has said the era of tax avoidance will end with the implementation of base erosion and profit shifting (BEPS) regime, and that the tax department will have to gear up to take action against those attempting to avoid tax.
“The era of tax avoidance, I 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 uses all kinds of tools to avoid taxes, are going to be outliers in the system,” Anita Kapur, chairman of the Central Board of Direct Taxes, said at the CII global tax conference here on Thursday. She said the new framework developed by the OECD at the behest of G20 has accepted India’s stance that taxation should happen where the actual business takes place.
“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,” Kapur said. The OECD-G20 project on BEPS, presented to G-20 finance ministers in Lima on Thursday, provides governments with solutions to plug 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.
“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. India is no longer a minority voice in the BEPS project, she said. The CBDT chairperson assured taxpayers of all fairness in processes and compliance and 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 compliance is being made easy for all taxpaying segments – small and medium enterprises, large Indian corporates as well as multinational companies. According to Kapur, for companies with low profits, the average tax rate is higher under the current regime of exemptions, while bigger companies have the advantage of exemptions.
She said the tax rates for corporates would be brought down and exemptions would be phased out gradually. The CBDT head said the department has asked think tanks NIPFP and ICRIER to identify the tax gap in the system. One of them has come out pointing at the missing base, Kapur said. “The 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,” she said.
Kapur said people with large incomes are already under the net.
