Finance Minister Pranab Mukherjee on Wednesday maintained that it was the ‘carefully-designed' stimulus packages put together by the government in the wake of the global meltdown that led to a remarkable turnaround and the Indian economy may now witness a growth of 7.5 per cent this fiscal and over 8 per cent in 2010-11.
Inaugurating a three-day international seminar on transfer pricing issues jointly organised by the Central Board of Direct Taxes (CBDT) and the Organisation for Economic Cooperation and Development (OECD) here, Mr. Mukherjee said: “During 2008-09, there has been a dip in the growth rate of GDP [gross domestic product] from an average of over 9 per cent in the previous three fiscal years to 6.7 per cent. In the face of these difficulties and in the midst of the economy's slowdown, the Government put together a carefully-designed stimulus packages. This enabled us to weather the crisis better than many other countries.”
Mr. Mukherjee pointed out that if the Index of Industrial Production (IIP) figures for December 2009 were any indication, “we may end 2009-10 with a growth rate of 7.5 per cent and next year growth at over 8 per cent.”
The globalisation of the Indian economy with the rest of the world, Mr. Mukherjee said, had created an opportunity as well as challenges. While the opportunity was in terms of a global market for movements of capital, goods, services and human resources, the challenges it offered were in terms of sophisticated tax planning tools for avoiding tax liabilities. “The advent of e-commerce, the global structure of enterprises and the dramatic expansion of trade and investment by multinational enterprises in recent years confirms absolute importance of transfer pricing in terms of tax revenue at stake,” he said.
In this regard, Mr. Mukherjee expressed concerns over tax havens and noted that financial manipulations in these areas affected tax collections and could also be detrimental to security interests. “The opaque system of exchange of information in these tax havens and their non-compliant behaviour are matter of concern not only for revenue base but also linked to financing of activities which are detrimental to the national security interests,” he said.
Even as India is in the process of revisiting its tax treaties with a number of countries, including tax havens which have secrecy of laws on taxes coupled with very low or zero tax rates, the Finance Minister also pointed to the role of these tax havens and blamed them for enhancing the adverse impact of the global financial crisis. “It is widely believed that the tax havens and low tax jurisdictions were important actors in the crisis,” he said.
Mr. Mukherjee also noted that while agreements on transparency in tax matters were resisted earlier on the pretext of secrecy, a consensus seemed to be evolving at the global level that tax havens need to adhere to the established norms floated by the Global Forum set up by G-20 group of nations to bring about transparency in exchange of information among countries on taxation issues. “The global pressure seems to be working and many tax havens and low tax jurisdictions have already signed and many have proposed to sign exchange of information agreements for transparency in cross-border agreements,” he said.
The Finance Minister stressed that it would be in the mutual interest of all countries to maintain a healthy global fiscal system which is self sustainable and all important actors including the tax havens comply with established norms of transparency and fiscal discipline.