The Hindu Business Line : Draw up model double taxation pact, says FICCI

TO minimise the complexities of cross-border transactions and speed up the flow of investments between India and other countries, the Federation of Indian Chamber of Commerce and Industry has suggested a few measures.

To overcome taxation of the same income twice, India should draw up a model Double Taxation Avoidance Agreement (DTAA), says the chamber. The model would help settle issues on which India wishes to adopt a non-negotiable stance. This could include limitation of benefit clause that would mitigate treaty shopping by residents of a third country.

In addition, the model would also be useful in providing a broad framework on those issues where India is willing to adopt a give and take approach, such as the rate of withholding tax against royalty income or fees for technical services.

The chamber has also suggested setting up of an International Tax Organisation (ITO). It is widely felt that DTAAs negotiated by a developing country on the basis of a peculiar set of compulsions may not work successfully when it becomes a developed nation. Thus, having an ITO that is a true representative of both the developing and developed countries of the world would mean not only tax harmonisation but also better and effective exchange of information leading to effective tax administration and parity between countries throughout the world.

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