Global tax valuation and financial advisory firm, Andersen has listed India as among its top three priority markets. In an interview to businessline, Mark L. Vorsatz, Global Chairman of Andersen along with Rakesh Nangia, Chairman, Nangia Andersen LLP, expressed high optimism for the Indian economy.
What is Andersen’s plan for India?
Mark: We are thinking about launching a consulting business globally. Management consulting or technology consulting are significant and you have to have those core capabilities. But we don’t think that’s where the future is. The future is in areas like cybersecurity, that’s going to be a massive one; it is going to be a big problem. You’re going to have people hacking major companies everywhere. Digital transformation is another area that you’re going to see fabulous growth. We have learned over the last three years that technology has created a wide level of flexibility in how businesses operate. These are value propositions that we want to be active in. And we’re looking at industries of the future. Telemedicinea and changes in educationare areas that we want to be at the forefront. We see in a market like India where you have such phenomenal potential consumption and economic growth. It’s got to be one of our top three priorities globally.
How does the world see India?
Mark: I am a globalist and I believe in globalization. And so fundamentally, if you look at the world, India has got to be at the top of your list because of demographics and growth potential. When I was a partner with Arthur Andersen, I was involved in our decision in 1990, going to China, at that time, my US colleagues said, they are not making that much money, but it was. We expected the economy to continue to grow. And I would say, if you’re looking at over the next 10 years, I will not be surprised if, of the major countries, India has the fastest growth rate.
How is India doing on taxation and compliance front?
Mark: With the global minimum tax, you’re going to see the importance of global tax integration so that a company doesn’t end up with more than a 15 per cent global rate. About 140 countries have signed on. If you don’t have an integrated global service model, then it’s going to be very difficult for you to ensure you don’t pay more than 15 per cent. We think this is an advantage for us because we have, by far, the largest global platform with a presence in 174 countries, and PWC is number 2 with 149 countries. We see this as an advantage for us from a service standpoint because we think that’s really important. Now, I think relative to India, I would expect much greater foreign investment over the next 10 years. And I think, while India is moving in that direction, they need to move more, they need to create more opportunities to encourage companies to come and invest in India by minimizing some regulatory issues on local taxation sales.
Rakesh: There has been a dramatic change taking place. For the last 5-7-10 years, never has so many changes come in taxation, in terms of faceless assessment, not going to the Tax Office, and everything becoming electronic. It should be a continuously evolving process. Another important area is reducing litigations, and it is happening.
What does global minimum tax mean for India?
Mark: I am a free trader, and I think free trade increases everybody’s revenue. So, I think that this will actually be a constructive thing, not a destructive thing. What we’ll do is, we’ll get rid of some of the tax havens. Getting rid of those tax havens levels the global playing field. At the end of the day, it will increase revenue for Governments, because if it spurs economic activity, everybody wins.
Rakesh:Global minimum tax is meant for countries that have lesser taxation, less than 15 per cent. And the objective was that every company must contribute to the Government exchequer, not less than 15 per cent. And if you’re using the tax planning tools, you still have to pay 15 per cent taxes or the deficit, then you pay back in the home country. India has a tax rate of more than 15 per cent, the chances of India losing taxes are very minimal because you’re already paying more than 15 per cent. But if companies are set up in a different jurisdiction, where they are paying less than 15 per cent, those companies will be required to pay in those jurisdictions or back home in the end.
There is thinking that India might lose tax revenue because of global minimum tax, your view?
Mark: There are many planning opportunities under current global tax laws to offshore earnings. And so, you’ll see countries like Ireland or Netherlands where people will set up their technology base there, they’ll pay a license fee so that they can make sure that significant portions of their price profits are located in that country. A lot of people were waiting to see if it was going to pass in the United States first, and now that it has, it will have a big impact globally. But it will result in more global tax revenues. And countries like India, where in the past maybe there were advantages in off-shoring certain activities, those advantages won’t exist anymore. And then you get down to real business issues as to why you would offshore if you could have them here. At the end of the day, I’ll bet you this will be a money-raiser. I could make the same argument in the United States. The Budget Committee in US thinks it’s going to increase corporate tax revenue or not decrease it.