Swiss hurry tax treaties to get off G-20 ‘grey list’

Switzerland is rushing to sign an additional tax information deal to secure its removal from a tax haven list later on Thursday, when a meeting of the Group of 20 nations starts.

A Swiss diplomatic source said the government planned to sign a 12th double-taxation treaty, fulfilling conditions for being be taken off the international tax haven list drafted by the Organisation of Economic Cooperation & Development. “This is the plan,” the source said.

G-20 leaders agreed to name and shame offshore centres that did not cooperate on tax evasion in April and threatened them with sanctions.

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New tax code calls for radical changes

Finance minister Pranab Mukherjee stuck to his Budget promise on Wednesday, releasing the draft Direct Taxes Code aimed at rationalising and simplifying India's obtuse tax regime, while expanding the base and moderating rates. The exercise has taken over a year.

The new code proposes a slew of radical reform measures-lower income and corporate tax rates, abolition of securities transaction tax and an increase in the annual deduction on savings to Rs 3 lakh and brings all pension schemes under a common tax system.

Mukherjee said the government would have "informed discussion with stakeholders" on the code, which rewrites the Income-Tax Act of 1961.

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Advance tax growth slows

The economic slowdown appears to be casting its shadow over corporate profitability expectations. So while direct tax proceeds have almost doubled in the first four months of the fiscal,the advance tax kitty has not risen proportionately.

While corporate collections from direct tax up to end-July increased by 46.95% over the previous fiscal, advance tax collections rose by a mere 18%. Until July 31 this year, the government netted Rs 23,500 crore in advance tax, against Rs 19,900 crore in the same period a year earlier. In 2007, advance tax collections from the first installment increased 35%, against Rs 14,700 crore up to July 31,2006.

"There has been an increase in corporate advance tax collections, but it is lower than what was recorded last fiscal," an official source told FE.

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Roads, health, jobs key to fiscal stability

The hill state of Himachal Pradesh has had an indifferent rate of economic growth, with no major investment proposals fructifying in the past two years. The state has a debt overhang of Rs 22,930 crore as on March 2008, against a current revenue of Rs 9,397 crore (2008-09), which has posed major fiscal challenges before the current BJP government. Chief minister Prem Kumar Dhumal talks with FE’s Swarleen Kaur on the outlook for the state.

What is the trend in tax collection?

There is certainly buoyancy in the tax collection but our major resource remains the power sector. Excise duty collection stood at Rs 390 crore, sales tax, including VAT, at Rs 1,092 crore and personal goods transport tax collection was recorded at Rs 55 crore. Other tax deposits stood at Rs 1,37 crore, making a total of Rs 1,970 crore.

The hydel sector has become the main focus of any government in Himachal.

Around 50% of our revenue is being generated through power sector. We earned around Rs 1,200 crore by selling power last year. Currently 6,515 mw is being generated in the state and we have target to produce another 5,700 mw by 2012. For this, various hydel projects are underway in the state.

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Revenue sharing row keeps IPL matches off big screen

The chances of enjoying IPL matches on 75 mm screen is almost ruled out after Multi Screen Media Pvt Ltd (the new name of Sony Entertainment) and the major multiplex players couldn't settle the revenue sharing arrangement. The talks fell flat when Sony refused to grant telecast rights to multiplexes for anything less than 60% of the revenue earned through screening of IPL matches, according to industry sources.

In earlier stages, Sony had insisted on charging the multiplexes around 65 to 70% of the revenue, which the industry players found difficult to concede. Additionally, the multiplex owners would have had to pay a tax on a full house for showing the event. "Such is the tax structure, that in case of category of special event sunder which the IPL format falls, we have to pay taxes for a full house even if only five people turn up. After sharing 60% of revenue with Sony and paying a tax to government for full occupancy, what would we be left with?" said a source.

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Deadlock may delay Central Sales Tax phase out

In a fresh set back to the phase-out of the central sales tax (CST),the Centre and states have once again been unable to work out an adequate and agreeable compensation package for the planned 1% cut in the tax. The reduction in the CST rate was originally slated to be notified from April 1, 2008, as had been announced in this year's Budget and would have brought it down from 3% to 2%.

The stalemate has come up despite the empowered committee in its meeting earlier this month re-iterating its promise to reduce the rate of CST from 3% to 2%. Sources close to the development said the phase out process of the tax may now in fact get temporarily postponed, if a compromise is not worked out soon enough.

"While this would not be an ideal situation,and we hope that things get back on track, we can not completely rule out a delay in the phase out of CST,"an official source said.

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Rs 35,000 crore bonds to bail out oil cos

The finance ministry will issue around Rs 35,000 crore worth of oil bonds to partially cover the total under-recoveries of the oil marketing companies on domestic sales of petroleum products (petrol, diesel, LPG and kerosene) during 2007-08. The compensationworksouttobe50%,as against petroleum ministry's demand of 57.1%, of the total under-recoveries of the oil marketing firms for 2007-08, pegged at Rs 77, 303 crore. As of now, oil bonds of the face value of Rs.20,333 crore, covering the period April-December 2007, have been issued to the oil companies.

The decision was taken at a meeting between finance minister P Chidambaram and his petroleum ministry counterpart Murli Deora on Tuesday. "We have asked 57.1% oil bonds. And they (the Finance Ministry) are not ready for it. So we have requested him (Chidambaram) to issue as much as possible," Deora told reporters after meeting the Finance Minister.

It may be recalled that the Cabinet Committee on Political Affairs (CCPA) had considered the matter in its meeting held on February 14, 2008. While approving the group of minister's decision for a marginal price increase in respect of petrol and diesel, the ministers of finance and petroleum were authorized to decide in consultation with each other on the portion of the under-recoveries for 2007-08 to be covered by oil bonds.

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Govt likely to tax companies on forfeited share money

India Incmay soon have to pay tax on capital income that arises for companies from money forfeited as part-payment for their shares.

At present, for subscribing to the share capital of a company, payments can be made in installments by an investor.

For instance, if investors apply for shares, they pay in part and are allotted the shares.But the investors have to pay the remaining amount by a stipulated date.

Any delay will mean forfeiting of the earlier installments by companies. The forfeited money remains with a company and is neither returned to shareholders nor to any government authority.

Companies also do not pay tax on this money, claiming it to be a capital receipt. Tax authorities feel the money should now be taxed because it is not earned through productive activities of companies.

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Image and Article source: The Financial Express
Article taken from the issue: 28 Jan 2008