FM, leaders to meet tomorrow on steps to rejuvenate economy

New Delhi (PTI) - Indian Finance Minister Pranab
Mukherjee will meet leaders of Indian industry, including
Ratan Tata, Mukesh Ambani, Anil Ambani and Sunil Bharti
Mittal, on Monday as the government tries to tackle a sluggish
economy amid spiralling inflation and high interest rates.
Other top industry leaders, Kumar Mangalam Birla, Y C
Deveshwar and Narayana Murthy and Anand Mahindra have also
been invited to the meeting to discuss ways to rejuvenate the
economy, Finance Ministry sources said.
"The Finance Minister will discuss steps to boost
industrial output and promote economic growth and has invited
chiefs of country's 17 top corporates," they said.
The industry, which is reeling under a high interest
regime for quite sometime now, is likely to point out their
trouble areas as rising inflation is making credit costly.
To tame inflation, which has remained close to double
digit mark through April-June quarter, the Reserve Bank has
hiked interest rates three times so far this fiscal.
Industry is of the view that rising interest rates is
increasing the input cost as loans are getting costlier.
In an interview to PTI, Mukherjee admitted that high
interest regime being followed by the Reserve Bank "to some
extent may effect (the GDP growth)..."
The impact of slowing credit is also visible in
industrial output growth rate, which dipped to a nine-month
low of 5.6 per cent in May due to poor show of manufacturing
and mining sectors and lower off take of capital goods.
The central bank has raised its key policy rates 11 times
since March 2010 to check inflation which is above 9 per cent.
The government, sources said, is also concerned about
slowdown in investments, particularly the inflow of FDI.
Measures to attract more foreign and domestic investment
are likely to figure prominently during the meeting.
FDI has slumped by about 9 per cent to USD 6.5 billion in
the first four months of the calendar from USD 7.14 billion in
the same period last year.
Several economic reforms initiatives which include
raising of the FDI limit in insurance sector, allowing FDI in
retail and revamp of the direct and indirect tax system are
pending.
The government had projected that India's GDP growth
would be between 8.75 per cent and 9.25 per cent this fiscal.
However, the Reserve Bank lowered the growth projection for
the current fiscal to 8 per cent, lower than the 8.5 per cent
recorded in the previous fiscal.
Global ratings agency Fitch has also lowered its growth
forecast for India in 2011 to 7.7 per cent from 8.3 per
cent previously.
The committee will consider proposing a reward scheme
for informants who supply information about such tax
defaulters and which results into collection of the
outstanding demands.
The other point in the terms of reference is to
propose a scheme regulating such outsourcing to outside
agencies for its administration by the field formation.
The committee shall submit its report within 2 months.
Earlier, it was noticed that there is a huge
outstanding demand which is not recoverable due to reasons
like assesses not being traceable and there were no assets
available for recovery.
Mukherjee said the amendment of Prevention of Money
Laundering Act (PMLA) has tremendously widened the scope of
money laundering investigations.
During such exercise involving a number of
investigations, the Directorate has initiated overseas
enquiries and forwarded letters of request to foreign
administrations for not only collection and verification of
information but also for obtaining evidence.
The provisions of PMLA also allow for causing
attachment of the tainted proceeds located abroad by
requesting the foreign administrations through letters of
request issued by competent courts.
In the proposed Direct Taxes Code Bill, he said for
the purpose of levy of wealth tax, taxable assets have been
defined to include deposits in banks located outside India in
the case of individuals, unreported bank deposits in the case
of others, interest in a foreign trust of any other entity and
any equity or preferential shares held in a controlled foreign
company.
The General Anti-Avoidance Rule (GARR) has been
incorporated to deal with aggressive tax planning devices used
to circumvent tax laws.
Specific Controlled Foreign Company (CFC) rules have
been incorporated to bring to tax passive income earned by
residents from substantial shareholding in companies situated
in low tax jurisdictions.
In the DTC bill, a reporting requirement has been
introduced making it obligatory on the part of resident
assessees to furnish details of their investment and interest
in any entity outside India in the form and manner as may be
prescribed.
Talking about institutions involving illicit funds,
Mukherjee said administrative set up in the priority countries
and jurisdictions is being strengthened for effective exchange
of information, intelligence gathering and effective
implementation of the provisions of international taxation and
transfer pricing.
Recently, income tax overseas units in eight countries
namely USA, UK, Netherlands, Japan, Cyprus, Germany, France
and UAE have been created.
"We are in the process of deploying officers at these
locations. As on date, we have two income tax overseas units
located in Mauritius and Singapore and these units are
providing valuable information," he said.
Once India finalises Tax Information Exchange
Agreements with priority countries and jurisdictions, he said
government would review creation of more income tax overseas
units depending upon requirements.
The existing set up in Foreign Tax Division (CBDT) has
been strengthened. Additional manpower has already been put in
position, he said.
A dedicated Exchange of Information (EOI) Unit with
direct access power has been created under the Foreign Tax
Division of CBDT to ensure that the work of exchange of
information is effectively carried out.
The government has approved the creation of the
Directorate of Income Tax (Criminal Investigation) in the
CBDT.
The DCI will perform functions in respect of criminal
matters having any financial implication punishable as an
offence under any direct tax law.