Byte on while staying informed about the latest tax updates.
Just in case you missed it, a 1.9 kilometre wide ‘potentially hazardous’ asteroid safely flies past Earth. The entire Earth missed it too. Whew!!
This Week’s Dose-
On April 25…
A list of ideas were presented by 50 IRS (Indian Revenue Services) officers or the “Task Force”. These recommendations were presented with a view to revive the economy after COVID-19 and recorded in a 44-page document titled ‘FORCE’ or ‘Fiscal Options & Response to Covid Epidemic’.
A taste of IRS’ ‘Force’
– levy a 55% tax (including cess) for taxpayers having income above INR 1 crore
– additional one-time cess of 4% for taxpayers having income above INR 10 lakh
– increase the ‘equalization levy’ or ‘Google Tax’ from 2 percent to 3 percent
– direct cash transfer of INR 3000 to 5000 to the 12 crore most economically disadvantaged households
Ideas of the 1970!
The document proposes the opposite of what might be needed. With the rise in extreme circumstances, radical ideas in taxation have found its way in India.
Suggestions in the document are 1974 ideas returning in 2020. The document is suggesting a 55 percent tax (including cess) on people earning over INR 1 crore. This draconian tax rate was removed during the economic reforms of 1991. The document suggests an additional tax for MNCs, a surcharge on inheritance by overseas Indians and additional tax on gig money.
The liquidity in the hands of individuals is decreasing by the day. There has been a sharp decline in consumption and the revenue generated by the government might not cater to the needs of a country with a population of nearly 1.4 billion.
Around the world, Governments have been implementing tax incentive policies, tax breaks and tax holidays. India should aim at implementing a more predictable tax-regime.
May the F.O.R.C.E. ‘not’ be with you
The CBDT has rejected the report calling it “a violation of extant Conduct Rules.” The department further said “It is reiterated that the impugned report does not reflect the official views of CBDT/Ministry of Finance in any manner.”
The story in brief
India has her eyes on the more profitable digital and e-commerce economy. The 6% ‘equalisation levy’or the so called ‘Google Tax’ was first imposed in 2016 to tax companies such as Facebook, Google and Netfliix on their online advertising. This year India expanded its scope to all overseas e-commerce transactions originating from India . From April 1, the Government levied an ‘equalization levy’ for e-commerce companies at 2 percent.
560 million internet users!
India has the second largest number of internet users in the world at 560 million. It is a critical market where a number of companies have deeply invested. The digital industry across the world was caught off-guard. A lot of companies have been battling the fallout due to coronavirus. The USA Chamber of Commerce along with 8 other lobbying groups from Asia, Europe and Australia have urged India to delay its ‘new’ digital tax.
What are we looking at?
This tax seems to be aimed at foreign companies which have a significant local client base in India. Such companies had been billing the clients through their offshore units while effectively escaping the country’s tax system. India’s data localisation plan, issues with cross-border data flow, norms around intellectual property rights and India favoring local digital products might create several trade barrier flags.
“The timeframe within which this expansive new measure was approved and entered into force allowed for neither the dialogue nor the significant structural changes that would be necessary (for companies to comply),” said the letter.
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India’s Total Expenditure was over 23 lakh crore for the F.Y. 2018-2019. Ever wondered what are the areas of expenditure for India? Here is the breakup of a few important expenditures.
In 1660, England placed a tax on fireplaces. The tax led to people covering their fireplaces with bricks to conceal them and avoid paying the tax. It was repealed in 1689.
Now we know where the idea for brick-fireplaces comes from.
“The only thing that hurts more than paying an income tax is not having to pay an income tax.”-Thomas Dewar