The Central Government is worried over the rise in illicit fund outflows occurring primarily on account of trade mispricing, Revenue Secretary Sunil Mitra said seeking greater responsibility on the part of corporate behaviour, adding that the Government was looking at measures to check the trend.
Addressing the national executive of the Federation of Indian Chambers of Commerce and Industry (FICCI), he said that there was an unmistakable trend showing that the Indian private sector had shifted away from bank deposits to OFCs (other financial corporations). The share of Indian OFC deposits increased from 36.4 per cent of total deposits in 1995 to 54.2 per cent in 2009. The increasing recourse to OFC deposits relative to the banking system was a matter of concern, he said, noting that currently over 60 per cent of global trade was handled by MNCs. Quoting a recently-released report of Global Financial Integrity, a Washington-based think-tank, Mr. Mitra said that the report highlighted that the share of illicit flows from India increased from 0.5 per cent of gross domestic product (GDP) to 2.4 per cent over a four-year period beginning 2000, at a time when flows from China dropped.
He pointed out that the provisions of Advance Pricing Agreement proposed in the DTC would ensure proper bench-marking and stability in the transfer pricing regime.
The government has created 10 overseas income tax units and two of these, in Mauritius and Singapore have already become operational. These offices will be dedicated towards exchange of information and assistance in rapidly taking forward resolution of tax disputes and also assistance in transfer-pricing cases.
On the tax collection front, the revenue secretary said that the negative or moderate growth clocked by 50 per cent of the individual industry sectors was an area of concern although the remaining half had done extremely well. “It is worrisome that the sectors not doing well represent the labour-intensive sectors,” he said.
He said that the significant increase in tax revenues and the corresponding growth in budgetary support availability warrant a phased return to sector-specific promotion programmes being formulated by domain experts and operated transparently through their budgets under administration and “not through tweaking fiscal policy as we have done over the years,” Mr. Mitra said.
