Advance Ruling Facility Likely For Domestic Investors Too

The advance ruling facility is likely to be extended to domestic investors also, revenue secretary N K Singh said yesterday. At present the facility is available to foreign investors only.

Addressing the India seminar hosted by the International Fiscal Association, Singh said that so far the feedback on the order of the Advance Ruling Authority had been very favourable.

Singh also stated that India was revising its double taxation treaty with Switzerland in alignment with the changes taking place within both countries.

Giving an account of the tax reforms undertaken since 1991, Singh said the government was striving towards raising the tax-GDP ratio to 12 per cent from the present level of 10 per cent.

The highest tax rate of 30 per cent in India was comparable to other developed countries, Singh said. He said the present tax rates were moderate enough to dispel tax evasion. The strategy, modelled along the Laffer taxation theory, assumes higher tax compliance at low rates.

I am beginning to suspect that the mythical Laffer curve may not exist. But all the same, moderate tax rates do encourage better compliance, Singh said.

On customs duties, he said the government was moving towards aligning domestic rates with competing Asian countries. This reduction, however, would be phased so as to give the domestic industry adequate time to adjust to the changes.

On excise duties, he said the government was moving towards a mean tariff of 18 per cent. Also, there would be a higher tariff for non-merit goods and a lower one for other commodities, he said.

Singh also called for a national debate on taxing agricultural income.

So far terms of trade have always been in favour of agriculture and inputs like electricity, fertilisers and irrigation facilities are provided to the agricultural community at subsidised prices, he said.