By James Mathew
India's call for international coordination on investigations on tax offenders comes against the backdrop of its recent decision to hike investment limit for foreign portfolio investors
India’s finance minister Nirmala Sitharaman has urged G20 members to work on closer collaboration between international revenue agencies to investigate tax affairs of offenders who cross borders to escape tax investigation.
Speaking at G-20 finance ministers and central bank governors meeting in Riyadh, India’s finance minister has also emphasised the need to enhance global risk monitoring and called upon member countries to explore the scope for policy co-ordination to deal with such risks.
“The international community has a unique opportunity to design a new international tax system to handle the challenges of digitalisation with a cost efficient dispute prevention mechanism,” Sitharaman said, while addressing participants at the two-day conference, according to a tweet by India’s finance ministry.
India’s call for international coordination on investigations on tax offenders comes against the backdrop of its recent decision to hike investment limit for foreign portfolio investors (FPIs) to 15 percent of the outstanding stock of corporate bonds in the domestic market from the earlier 9 percent limit.
While move on FPI investment was done to deepen India’s corporate bond and government securities market, there have been several instances of disputes and controversies in the past over such investments, especially by FPIs registered in tax heavens.
NRIs (non-resident Indians) are also now allowed to invest in the Indian market through the FPI route. Expat Indians based in Gulf countries are major investors in the Indian capital market.
The Indian finance minister’s comment on the issue of tax evasion also assumes significance in the wake of a proposal in India’s Union Budget 2020 to tax the global income of NRIs who do not pay tax in any other country. The proposal had sent shock waves among NRIs based in many Gulf countries which do not have the system of personal tax.
The finance ministry subsequently clarified that Gulf NRIs will not have to pay tax in India for their bona fide work-related global income.
On the issue of need to enhance global risk monitoring, the Indian finance minister pointed out that growing inequality has slowed down the pace of inter-generational mobility globally.
“Identifying the causes and developing solutions (for this slowdown) require co-ordinated policy solutions,” Sitharaman said, according to the finance ministry tweet.
The Indian finance minister has also held bilateral talks with her counterparts from the Gulf countries and also with the officials of the Organisation for Economic Co-operation and Development (OECD) on the sidelines of the G20 event in Riyadh.