Tax disputes due to MNCs juggling act

Investment in infrastructure space and there should be easy access to finance, says RBI’s Rajan

GN Bureau | February 5, 2016



Blaming, Reserve bank of India governor Raghuram Rajan has blamed multinational corporations for tax controversies and felt that their indulgence in avoidance and evasion results in legal battles.

"Occasionally, there is government excess, but they are not the only ones who commit excesses," he said on Thursday, delivering the 13th Nani Palkhivala lecture on 'Strengthening the free enterprise in India' in Mumbai.

"Multinational corporations complain all the time of excessive demand about excessive taxation, but it is also true that MNCs across the world tend to find tax avoidance and sometimes tax evasion as an appropriate technique and therefore, there is a constant fight between governments and MNCs," he said.

In remarks that come within a week of Prime Minister Narendra Modi assuring all retrospective taxation such as the infamous Vodafone case being an issue of the past,

Rajan said the movement on taxation within the country has been "positive and in right direction".

"The movement has been positive and in right direction, including the great debate on retrospective taxation which has allowed us to clarify our thinking on this issue and the government has stated its position very clearly on the way forward."

“There is a very uneven playing field between creditors and large borrowers,” Rajan said, adding large borrowers could control the system on their own for many years and banks couldn’t do much. However, with small companies, banks are very effective. “Paradoxically, it eventually hurts the large borrowers through increased credit cost by banks, by adding a huge risk premium for the borrower,” Rajan said.

He hoped that the bankruptcy code gets passed in the upcoming budget session of parliament. The code will help facilitate credit for both large enterprises as well as smaller ones which have suffered the most under laws like the Sarfaesi Act.

"It would make it much easier for the smaller firm to get credit and also allow the large firm to get credit because now there is a way for the lenders to recover the money in the bankruptcy code," he said.

Rajan said the government is also working on a plan to have unique IDs for businesses on the lines of the ambitious Aadhar programme for individuals, which will help establish credit histories and make it easier for the better-behaved firms access credit.

He called the notion giving credit to smaller businesses for job creation in the economy as a "myth", saying it is the large-scale firms alone which do the task effectively. To make it easier for smaller firms to do business, a tremendous amount of investment should be made in the infrastructure space and there should be easy access to finance. The new set of small banks would ensure easy access to finance in a way existing banks were not able to provide so far, Rajan said.

Welcoming the government's Start-Up India plan, he said there is a need to have a large number of smaller firms which are growing to become big businesses, and one should avoid creating a tendency where the entrepreneur prefers to remain small.

Stressing on the need for skilling people, he said "capitalism starts at the age 21" and one should not force children to undergo excessive competition before that.

Rajan said he is very optimistic about India of the present, despite the many problems it faces, saying "we have always found our way to fight the ills and emerge stronger".

"Yes, we have our weaknesses and our excesses, but our democracy is self-correcting, and even while some institutions weaken, others come to the fore. India's is a dynamic society, ever changing, ever rejuvenating," he said.

"In the spirit of what Palkhivala (the late eminent jurist) said, India always seems to find a way, perhaps not quickly, perhaps not linearly, but eventually in due course."

Comments

 

Other News

Nitish Kumar is back as Bihar CM – yet again

JD (U) leader Nitish Kumar was sworn-in as the chief minister of Bihar for the sixth time on Thursday after again striking an alliance with the BJP, barely hours after tendering his resignation as he parted ways with the RJD. And all this happened in less than 24 hours.   BJP

No clear distinction between professionals and amateurs in classical dance: Malavika Sarukkai

Malavika Sarrukkai is a Bharatanatyam dancer from Tamil Nadu. She began learning the dance form at the age of seven and made her stage debut at the age of 12. She was awarded the Sangeet Natak Akademi Award in 2002 and Padma Shri in 2003. Her work features in a government-commissioned documentary calle

Has Nitish played politics of opportunism?

Has Nitish played politics of opportunism?

Nitish Kumar quits as Bihar CM

Nitish Kumar resigned as chief minister of Bihar on Wednesday, just hours after RJD chief Lalu Prasad ruled out his son and deputy chief minister Tejashwi Yadav putting in his papers following a case being registered by the CBI. The JD(U) and RJD alliance had been under considerable strain o

Will the needy get homes under PMAY?

 The Pradhan Mantri Awas Yojana (PMAY), introduced in June 2015, aims at providing every family with “a pucca house with water connection, toilet facilities, 24x7 electricity supply” by the time the nation completes 75 years of its Independence in 2022.   The Yoj

No longer a walk in the park for bureaucrats

Continuing as a bureaucrat just got a lot tougher with the government weeding out the incompetent and taking action against 381 civil services officers, including 24 who were from the Indian Administrative Service.   The Narendra Modi government’s action against civil s





Video

Hurriyat leaders funding terrorists- NIA

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter