Finance Minister Pranab Mukherjee on Wednesday expressed the hope that the Direct Taxes Code (DTC), which seeks to modernise tax laws in the country, will come into force from April 1, 2012.
New Delhi: Finance Minister Pranab Mukherjee on Wednesday expressed the hope that the Direct Taxes Code (DTC), which seeks to modernise tax laws in the country, will come into force from April 1, 2012.
"The proposed Direct Taxes Code brings together the policy initiatives on direct taxes. It is slated to come into force from the next financial year," he said while addressing an international conference on 'Tax and Equality'.
In a bid to modernise the tax system, the government has proposed to replace the Income Tax Act, 1961, with a new legislation.
With regard to indirect tax reforms, the minister said, "We are moving toward an economy-wide, generalised value-added tax system of Goods and Service Taxes (GST) at all levels in the country."
While giving details of the tax reforms being pursued by the Indian government, Mukherjee also called for greater international cooperation to deal with the menace of tax evasion and black money.
"Tax evasion undermines the intended benefits of a progressive tax policy," the minister said, adding, "Resolution of these issues requires international cooperation and alignment of tax systems for better cross-border compliance."
Quoting global financial integrity report, Mukherjee said annual illicit outflows from emerging economies and developing countries average between USD 725 to USD 810 billion.
The Indian government, Mukherjee said, has adopted a four-pronged strategy to deal with the issues of tax evasion and black money.
The strategy includes joining the global crusade against black money and creation of a legislative and institutional framework to deal with illicit money.
Although the strategy has started showing results, Mukherjee said, "The complexity of cross-border transactions is on the rise and presents a serious challenge to tax administrators in practicing and bringing equality."
"The opacity of tax systems in some of the jurisdictions is adding to the challenges. There has been some movement on these issues in response to the initiative by the G-20. We need to pursue this to its logical end," he added.
Referring to tax reforms within the country, Mukherjee said India has been pursuing them in a gradual manner.
The tax reforms, he added, are aimed at rationalisation of tax rates, broadening of the tax base, special focus on sunrise areas like transfer pricing and international taxation, and strengthening of the tax information exchange network.
The government, he added, was also focusing on providing better taxpayer services, a reduction in the cost of compliance and focused enforcement in the case of high net worth individuals.
The progressive personal income tax policy, Mukherjee said, has resulted in a ten-fold increase in revenue collections, which went up from USD 8.62 billion in 1996-97 to USD 87 billion in 2010-11.
"More importantly, the composition of our tax revenues has altered significantly in favour of direct taxes, which now account for nearly 60 per cent of our tax revenues," he added.
The speakers at the international tax conference underlined the need for more equitable fiscal policy with a view to safeguard the interest of the poor.
"In our surveillance and programme work, we have long highlighted... that the benefits of the huge fuel subsidies in many countries go overwhelmingly to the richest and that there are better ways to help the poor," said IMF Deputy Managing Director Min Zhu.
Fiscal consolidation to deal with the global economic problems, he added, "will be painful in many countries, but it does not have to be unfair... social benefits could be reconfigured so as to protect the poorest and still leave a sizeable revenue gain."
The fiscal policy, Min said, could be used to deal with the problem of inequality across countries and between regions.
The concerns of growing inequality, he added, were being expressed by people through movements like Occupy Wall Street and the Arab Spring.
Chinese Vice Minister of Finance Wang Jun said recovery of the world economy is an arduous process and there will be a painful period of adjustment.
"... Global financial and tax communities should make full communication, properly handle differences and take concerted action to promote strong, sustainable and balanced growth of the world economy," he said.
Wang also called for strengthening tax cooperation to support the development of global governance architecture.
Promoting equitable tax policy, he said, would help in reaching the fruits of development to the labour force and deprived sections of society.