IMF: Global corruption costs trillions in bribes, lost growth

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Public sector corruption siphons $1.5 trillion to $2 trillion annually from the global economy in bribes and costs far more in stunted economic growth, lost tax revenues and sustained poverty, the International Monetary Fund said on Wednesday.

In a new research paper, the IMF said that tackling corruption is critical for the achievement of macroeconomic stability, one of the institution´s core mandates.

The Fund argues that strategies to fight corruption require transparency, a clear legal framework, a credible threat of prosecution and a strong drive to deregulate economies.

“While the direct economic costs of corruption are well known, the indirect costs may be even more substantial and debilitating,” IMF Managing Director Christine Lagarde wrote in an essay accompanying the paper. “Corruption also has a broader corrosive impact on society.

It undermines trust in government and erodes the ethical standards of private citizens,” Lagarde added.

The paper, titled “Corruption: Costs and Mitigating Strategies,” follows Lagarde´s warning to Ukraine in February that the IMF would halt its $17.5-billion bailout for the strife-torn eastern European country unless it takes stronger action to fight corruption, including new governance reforms.

Lagarde is due to participate in a British government-sponsored anti-corruption summit in London on Thursday that will include U.S. Secretary of State John Kerry and other senior officials including the presidents of Nigeria and Afghanistan.

Extrapolating from 2005 World Bank research, the paper estimated that around 2 percent of global gross domestic product is now paid in bribes annually.

But it said corruption´s indirect costs are substantially higher, reducing government revenues by encouraging tax evasion and reducing incentives to pay taxes, leaving less money available for public investments in infrastructure, health care and education.

Source: http://www.thenews.com.pk/latest/119186-IMF-Global-corruption-costs-trillions-in-bribes-lost-growth

Income tax refunds worth Rs 1.22 lakh cr issued in FY’16: Govt

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The Income Tax department has issued 2.10 crore refunds totalling over Rs 1.22 lakh crore in 2015-16, which saw 94 per cent the returns being filed online.

“During FY 2015-16, more than 2.10 crore refunds amounting to Rs 1,22,425 crore were paid compared to Rs 1,12,188 crore in the Financial Year 2014-15 and Rs 89,664 crore in the Financial Year 2013-14,” a finance ministry statement said.

In 2015-16, more than 94 per cent of income tax returns were filed online and 4.14 crore returns were processed by the Central Processing Centre (CPC), Bengaluru, without any human intervention.

Both the Central Board of Director Taxes (CBDT) and Central Board of Excise and Customs (CBEC) are making optimum use of technology for expeditious disposal of assessment and refunds as well as for addressing the issues relating to custom clearance and facilitating trade among others, it said.

As regards indirect tax collections last fiscal, the indirect tax to GDP ratio is about 5.17 per cent as compared to 4.36 per cent for FY 2014-15.

Indirect tax to GDP ratio for the current Financial Year 2016-17 is estimated to be 5.20 per cent, the ministry said.

E-payment of Central Excise and Service Tax refunds and rebates through RTEGS/NEFT has been implemented and 80 percent of the refund amount is granted within 5 days for service exporters.

Single Window Interface for Facilitating Trade (SWIFT) acts as a single point interface for over 50 offices of six government agencies for clearance of Exim Goods and reduces documentation and costs, thereby benefiting over 97 per cent of India’s imports, the ministry added.

Source: http://www.firstpost.com/business/income-tax-refund-financial-year-2768332.html

Ultra-rich must declare cost price of expensive assets: CBDT

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People with annual income of over Rs 50 lakh will have to disclose the acquisition cost of all the assets like land, building and jewellery in the Income Tax return forms for assessment year 2016-17.

The luxury items to be disclosed will also include utensils, apparels and furnitures studded with precious stones and ornaments made of gold, silver, platinum or any other precious metal or alloy.

“The amount in respect of assets to be reported will be the cost price of such assets to the assessee,” the Central Board of Direct Taxes ( CBDT) has said while issuing instructions on the new ITR forms.

In case the precious items had been received as gifts, the assessee will have to declare the cost of acquisition by the previous owner along with value additions.
“In case where the cost at which the asset was acquired by the previous owner is not ascertainable and no wealth-tax return was filed in respect of such asset, the value may be estimated at the circle rate or bullion rate, as the case may be, on the date of acquisition by the assessee as increased by cost of improvement, if any, or March 31, 2016,” the instructions said.

The assessee will also have to declare whether such items and their value were disclosed at the time of filing wealth tax returns earlier.

The tax department had in April notified the new ITR forms for assessment year 2016-17 and introduced a fresh reporting column in ITR-1, ITR-2 and 2A called ‘Asset and Liability at the end of the year’ which is applicable in cases where the total income exceeds Rs 50 lakh.

“There are only 1.5 lakh individuals whose total income would be above Rs 50 lakh. This schedule in ITR only applies to ultra-rich and will not affect the common man,” Revenue Secretary Hasmukh Adhia had earlier said.

As per the new schedule in ITR forms, individuals and entities coming under this total income bracket will have to mention the total cost of movable and immovable assets.

While immovable assets include land and building, movable assets to be disclosed were cash in hand, jewellery, bullion, vehicles, yachts, boats, aircraft etc.

ITR-1 can be filed by individuals having income from salaries, one house property and from other sources including interest. ITR-2 is filed by Individuals and HUFs not having income from business or profession. ITR-2A is filed by those individuals and HUFs who do not have income from business or profession and capital gains and who do not hold foreign assets.

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http://economictimes.indiatimes.com/articleshow/52106652.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

Companies need not make adjustments in net profit for MAT under IndAS

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate Updates, Income Tax,e-Filing- Individuals, Firms, Companies | 0

Giving some clarity to companies switching to the new accounting standards, an expert Committee of Finance Ministry has said that there may not be any rise in tax burden for them.

The committee, led by retired Indian Revenue Service Officer MP Lohia, has concluded that corporates will not have to make any adjustments to net profits while computing book profits to pay minimum alternate tax (MAT).

“…considering the implicit relation between distributable profits which is available for payment of dividend distribution tax, no further adjustments are required to be made to the net profits (Excluding net other comprehensive income) of India AS compliant companies, other than those already specified…,” the Committee report said.

The government had set up the expert panel in June last year to resolve the differences arising in the computation of MAT when companies with a turnover of over Rs. 500 crore adopt the Indian Accounting Standards (IndAS) from 2016-17.

A number of firms had expressed concerns over their tax liabilities rising significantly due to the new system of accounting.

Public comments sought

The Finance Ministry has now sought public comments on the report by May 10, before it finalises the guidelines.

“The Committee submitted its report on 18 March, 2016 after having consultation with the Ministry of Corporate Affairs (MCA),” it said in a statement on Thursday.

“The net profits under Ind AS may include a sizeable amount of notional or unrealised gains or losses. If the MCA prescribes any further adjustments to the current year profits for computation of distributable profits, the requirement for any additional adjustments to the book profit under section 115JB may be examined,” said the Committee in its report.

It also recommended that items that are a part of the net other comprehensive income should be included in book profits for MAT purposes at an appropriate point of time. These include changes in revaluation surplus, re-measurements of defined benefit plans, gains and losses from investments in equity instruments designated at fair value.

It further said those adjustments recorded in reserves and which would subsequently be reclassified to the profit and loss account, should be included in book profits in the year in which these are classified to the profit and loss account.

Positive response

Experts welcomed the report and said it is in harmony with the current structure.

“Industry can now start preparing themselves for the accounting standards. It has indicated that the same treatment would be carried forward,” said Vikas Gupta, Partner, Nangia & Co.

Sunil Shah, Partner, Deloitte, concurred, saying: “The usual adjustments will continue to be made.

But, there could be an impact in cases where unrealised gains and losses on fair value accounting are recorded in the profit and loss account, which is permissible under IndAS.”

 

Source: http://www.thehindubusinessline.com/todays-paper/tp-news/companies-need-not-make-adjustments-in-net-profit-for-mat-under-indas/article8534184.ece

If you bought property but have not deposited TDS, you may get a tax notice

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While the rule has been in effect since June 1, 2013, many buyers are unaware or often confused about how to calculate the tax.If you bought property worth more than Rs 50 lakh and did not deduct tax at source (TDS) or failed to deposit the amount with the income tax department on time, you may have to pay a penalty of up to Rs 1 lakh.

Several taxpayers recently received notices from the department for no t doing so. Anyone buying real estate worth more than Rs 50 lakh has to deduct 1% of the price of the property before paying the seller. That 1% TDS has to be deposited with the tax department using Form 26 QB.

“The income tax department recently matched the TDS data with the data they received from the property registrar for property transactions over `50 lakh. Wherever there was a discrepancy, either the buyers failed to deduct or deposit the TDS, a notice has been sent,” said Vaibhav Sankla, director, H&R Block.

While the rule has been in effect since June 1, 2013, many buyers are unaware or often confused about how to calculate the tax. TDS has to be calculated on the total sale price  and not the amount exceeding Rs 50 lakh.

“Sometimes total sale price, which exceeds `50 lakh in aggregate, may be payable in instalments. The TDS in that case must be deducted from each instalment no matter how small the instalment is. Most people fail to do that,” said Archit Gupta, founder, ClearTax.in.

In case the payment is made in instalments, then TDS needs to be deducted at the time of making each payment. This TDS, deducted each time while paying the instalment, is to be deposited with the department by way of return cum challan (Form 26QB) within seven days of the following month of making the payment. Failing to do so can, apart from the dues and late filing interest, attract a penalty under Section 271H of up to Rs 1 lakh.

For those who have received a notice, the immediate corrective step to avoid paying a penalty is to pay the TDS along with the applicable interest and late filing fee.

The interest payable under Section 201 is 1% per month if tax wasn’t deducted and 1.5% in case this was done but not paid.

“This interest is calculated on the TDS amount from the date of payment, whether paid in lump sum or in instalments,” said Sankla. Take the example of a property purchased in January 2015 worth Rs 60 lakh where the first Rs 20 lakh was paid that month and the rest in June that year. For the first instalment of Rs 20 lakh, the interest will be applicable from January onwards, while that on the second payment will be from June 2015. There is also a late filing fee under Section 234E for delaying the interest payment of `200 per day, subject to the maximum of taxes due. There may be some leniency if the seller has already paid capital gains tax or claimed capital gains exemption (on the sale of property).

“The intent of the department is that there is no tax evasion. So, if the seller has already paid the taxes, the buyer can submit Form 26A certificate from a chartered accountant and request that penalty under Section 234E should not be levied,” said Gupta. Though this will save you from the late filing fee, the interest under Section 201 will still apply.

Buyers should also remember to issue Form 16B. “It is generated via TRACES and the seller may not be able to take tax credit for TDS deducted in case of non-filing or latefiling of Form 26QB,” said Gupta. Penalties remain the same for failing to do so.

Source:http://economictimes.indiatimes.com/articleshow/51901867.cms

 

Government looks to resolve 100 transfer pricing issues; seeks to sign more advanced agreements

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Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies

In a significant move towards a more progressive taxation policy the revenue officials have set an aggressive target of resolving about 100 transfer pricing issues by signing advance pricing agreements (APAs) with multinationals this fiscal, people close to the development said.

The government, through the Central Bureau of Direct Taxes (CBDT), had signed a record 55 APAs with multinationals in 2015-16. In all, the Indian government has signed 64 APAs, including 62 in the last two years. Now the government is getting more ambitious and officials are confident about achieving the target.

“We are already working on about 175 cases (APAs), and the target is achievable,” said a person close to the development. “Also, the officers who are dealing with the issue have now got fair amount of experience and work would be faster going ahead.”

Samir Gandhi, partner at Deloitte Haskins & Sells LLP, said, “In last one year, we have seen that the government has been very active in resolving the transfer pricing cases through the APAs. Going forward it is very likely that we will see more number of cases being resolved.”

An APA is mainly an agreement between a tax payer—mostly multinationals— and tax authority— CBDT in India’s case—where the transfer pricing methodology is determined. The methodology to calculate taxes could then be used for an agreed period of time on the tax payer’s future international transactions.

Transfer pricing disputes are mainly related to the calculation of profit made by multinational companies and how they have been shifted to their parent. Many firms have gone to court, challenging the government’s transfer pricing calculations. In July 2012, the government introduced the APA programme, which allows companies and the revenue authorities to negotiate the rate at which tax is to be paid and avoid disputes. Of the total APAs signed last year, 53 were unilateral agreements while two were bilateral agreements.

A unilateral APA is an agreement between the tax payer and the tax authority of the country (CBDT). A bilateral agreement is signed by these two plus the tax authority of the country where the multinational is headquartered.

Industry trackers expect that some more “complicated” APAs would be signed this year. “Going ahead some of these cases (APAs) will involve relatively complex cases/transactions and also application of TP methodologies of profit split and TNMM (transactional net margin method),” said Gandhi of Deloitte. Industry experts said the shift from a time when India was considered to be one of the most aggressive in the world on transfer pricing to the current situation has happened in last two years.

“There are primarily two developments which have happened in last one year in the context of transfer pricing disputes,” said Rohan K Phatarphekar, partner and national head, global transfer pricing services, at KPMG. “One is the government’s agenda of having a non-adversarial tax regime and improving the ease of doing business, which has resulted in lesser amount of transfer pricing adjustments, and the other is the CBDT circular clearly laying out the guidelines as to when a case needs to be referred for transfer pricing assessment which has reduced the overall number of cases picked up for scrutiny,” he said.

Experts also pointed out that the government’s stance on liberal transfer pricing comes at a time when many multinationals face the prospect of increasing disputes across the world. Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies.

Companies and tax consultants said that not only is the Indian government going all guns to resolve old issues in last one year, but also there has been no major transfer pricing demand as officials did not take an aggressive stance. Currently there are about 650 pending cases in APA, according to a report by Deloitte.

Going ahead, a lot of disputes also set to be resolved due to mutual APAs signed between Indian authorities and their US counterpart. This is mainly because the US Internal Revenue Service (IRS) has started accepting bilateral APA applications with India from February 16, 2016, the Deloitte report said.

Source:
http://economictimes.indiatimes.com/articleshow/51886742.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

NRIs with offshore bank accounts cannot escape investigation by tax authorities

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Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders give their consent.

Even NRIs with offshore bank accounts cannot keep the taxman at bay by obtaining quick relief from the court of law. In order to prove their innocence, such persons will have to instruct the overseas banks to share information on the accounts with the Indian tax office.

And, only after the details released by the bank show that the money lying in the account does not belong to the person who has been pulled up (for hiding offshore assets), can he escape the glare of tax officials.

The Bombay High Court recently dismissed the writ petition filed by an NRI — an alleged beneficiary of a trust linked to an account with HSBC Geneva — after she refused to sign the “consent waiver” form to let HSBC share the information on the account. Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders gives their consent.

The court, in its order dated April 5, said, “In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds, a person would make available the documents which would put to rest all questions which seem to arise in the mind of the authorities.”

Since the court did not allow the withdrawal of petition, the order is likely to be used by the tax office which is trying to fish out bank account and transaction details from those it suspects to have accounts with HSBC Geneva.

According to the base note that the French government had shared with New Delhi, the petitioner Soignee R Kothari, along with six other individuals and two trusts, are beneficiaries of an account held by one White Cedar Investments with HSBC Geneva; the seven individuals in turn are beneficial owners of the two trusts.

As on 26 March 2006, the account had a balance of more than $44 million. The department had served Ms Kothari a notice to reopen assessment for the assessment year 2006-07.

She has later agreed (in a rejoinder before the court) to sign the consent waiver form with a modification — as ‘alleged beneficiary’ rather than ‘holder or beneficiary’ of the account in HSBC Geneva.

“With this, the Bombay High Court has precluded any alleged holder of overseas bank account from seeking alternative remedy by way of a writ. However, their right to contest any addition of income by the tax authorities would still survive. Thus, while NRIs can prove that they are outside jurisdiction of Indian tax authorities, they cannot wriggle out of investigation by virtue of being NRIs,” said senior chartered accountant Dilip Lakhani. The other six alleged beneficiaries of the trust are Arun Ramniklal Mehta, Russell Mehta, Viraj Russell Mehta, Rihen Harshad Mehta, Naina Harshad Mehta and Priti Harshad Mehta.

The court said that this bank statement if obtained from HSBC Geneva “would reveal and/or possibly give clues as to the source of amounts deposited in the Account No. 5091404580.” “If a person has nothing to hide, we believe the person would have co-operated in obtaining bank statements,” said

Source : http://economictimes.indiatimes.com/articleshow/51870910.cms