IBM has been served notice by Tax authorities against valuation of imports. Recently, Accenture was scrambling to reduce its capital base. It was stuck as reducing capital base will increase the D/E or leverage for which permission of lenders will be required.
Why?
Lesser Capital Base or Equity will lead to lesser dividends and therefore lesser DDT
Broader Issues
This will lead to a situation where these global outsourcing companies will view India as unattractive and may shift their base to low cost locations.
Its high time that DDT should be done away with for hi-tech sectors such as IT and research. Any fall in revenue due to DDT can be countered by the relevant multiplier effect in economy and revenue collection thereof, in addition to accrued benefits related to entrepreneurship and innovation. Success of Indian companies in Pharma and IT are proof of this.
Why?
Lesser Capital Base or Equity will lead to lesser dividends and therefore lesser DDT
Broader Issues
- Inter Company transfers
- Payment of Royalty to Parent companies outside India
- DDT
- Valuation of Service in Import Invoices
This will lead to a situation where these global outsourcing companies will view India as unattractive and may shift their base to low cost locations.
Its high time that DDT should be done away with for hi-tech sectors such as IT and research. Any fall in revenue due to DDT can be countered by the relevant multiplier effect in economy and revenue collection thereof, in addition to accrued benefits related to entrepreneurship and innovation. Success of Indian companies in Pharma and IT are proof of this.
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