Says such schemes generate very little new investment

OECD seeks review of sops to SEZs

ECONOMY BUREAU
Posted online: Wednesday, July 04, 2007 at 0005 hours IST

NEW DELHI, JUL 3 : The government should review the tax concessions
given to special economic zones, export processing areas and software
technology parks, the Organisation of Economic Cooperation and
Development (OECD) has suggested at the two-day International Tax
Conference on Tuesday.
Pier Carlo Padoan, deputy secretary general OECD, said at the
conference, "The work undertaken by OECD suggests that such schemes
generate very little new investment and that there are considerable
advantages in ending such incentives." The conference was jointly
organised by the ministry of finance, Asian Development Bank (ADB) and OECD

Such schemes also have a tendency to distort the economy and do not
result in sustainable tax revenues, he added. The recommendation comes
at a time when the finance ministry has already made public its
reservations about such schemes.Simultaneously, it is also looking at
cutting down on various exemptions it has given out. The government is
also set to embrace international experiences in its efforts to
modernise and simplify the country's tax procedures and administration.

Issues relating to transfer pricing, international taxation,
strengthening the audit capacity, business process re-engineering and
improving taxpayer services will be some of the key areas where the
finance ministry may embrace international practices.

International models will also influence the movement towards
introduction of the goods and service tax regime. These decisions were
taken based on the recommendations of the conference.

Speaking at the conference on Tuesday minister of state for finance SS
Palanimanickam said, "The conference has provided an opportunity to the
revenue department officials to interact and brainstorm with their
counterparts from other administrations as well as experts and to learn
first-hand from their experiences."

So far, the country's tax reforms have been evenly poised in addressing
tax policy and administration issues, the minister noted. The broad
thrust of policy changes has been to simplify and moderate the rate
structure; rationalise exemptions and remove anomalies as well as to
expand the tax base, he said.

On the administration side, the cornerstone has been procedural
simplification to make it easier for the taxpayer to quantify and
discharge his tax liability, he added.

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