BEPS project: most Indian MNCs see double taxation going up in short term

A majority of Indian multinationals see the implementation of base erosion and profit shifting (BEPS) project of the Organisation for Economic Cooperation and Development leading to increase in double taxation and compliance burden for them, an India-specific BEPS survey by Deloitte India has revealed.

This is interesting given that one of the objectives of OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) is to reduce double taxation.

The project is an OECD initiative, approved by the G20, to identify ways of providing more standardised tax rules globally.

The whole idea of Deloitte India’s first-of-its-kind survey titled ‘Anticipating BEPS India impact’ was to gauge the pulse of corporates in India regarding BEPS project and the expected resulting impact on their organisations.

The good news is that more than 51 per cent of corporates in India have started planning for BEPS and assessing its impact, said Anis Chakravarty, Partner, Deloitte India.

“People are thinking even though there is no legislation (around BEPS as yet),” Chakravarty told BusinessLine in a chat on the findings of this India specific survey.

It is widely believed that the Modi-led Government would make its first move on OECD’s Action Plan implementation on BEPS in the upcoming Budget.

Elaborating on the findings of the survey, Chakravarty said that more than 85 per cent of those surveyed said that BEPS will significantly raise transfer pricing compliance burden.

Close to 50 per cent believed that BEPS would lead to increase in double taxation, he said.

“General view is that double taxation will go up in short to medium term, but in long term it should come down assuming everyone around the world adheres to the standards,” Chakravarty said.

As a member of the G20 and an active participant in the BEPS project, India is committed to the project outcome and it’s implementation.

Indian authorities believe that structural changes and mechanisms may need to be adopted as the BEPS project will result in an increased flow of information and exchange of information under treaties.