May 19, 2020

Will India open up once and for all to foreign investment?

Tomas H. Lucero
3 min
Will India open up once and for all to foreign investment?

India’s Finance Minister Arun Jaitley is finishing up a nine-day tour of the United States, during which he wooed U.S. investors to spend their money in India.

This move comes after “India’s benchmark stock index, the S&P BSE Sensex, which surged 30 percent last year, is down 1.4 percent so far this year, making India one of the worst-performing major Asian markets. Foreign institutional investors have pulled nearly $2 billion from Indian stocks since late April,” reports the Wall Street Journal (WSJ).

Evidently bleeding, Indian Prime Minister Narendra Modi dispatched Jaitley to the U.S. to reassure investors that their money is safe in India.

This is not the way things were supposed to be. Modi, who was recently elected, ran on a platform to reinvigorate economic growth in India. Once he was elected, investor excitement about the coming opportunities in India reached a fever pitch, contributing to the excellent performance of the S&P BSE Sensex. India being a democracy, though, and complex one at that, has not enjoyed the type of political atmosphere friendly to the revolutionary economic reforms—think recent Mexican energy reforms—it needs to pass in order for Modi to fulfill his economic campaign visions.

In other words, Modi and company have failed to deliver. Telling from Jaitley’s visit to the U.S., however, he is not ready to give up and may be more determined than ever to do it. In retrospect, it has only been a little bit over a year since his election and his political tasks are no walk in the park. Judging from Jaitley’s ambitious and busy agenda on his tour of the U.S., Modi fully intends to create the business paradise he promised to some of his campaign supporters.

According to the WSJ, “India’s finance minister said he expects Parliament to take action on measures to simplify the country’s tax regime. Mr. Jaitley also said the government is looking for compromises that would speed up passage of a new law aimed at easing the acquisition of land for development projects.”

This issue of land acquisition for project development is key, as Jaitley “will also give details regarding the role the foreign investors and companies can play in building-out India infrastructure in sectors like power, roads, highways and ports, among others,” reports The Dollar Business.

Another key matter is the issue of the Minimum Alternate Tax, or MAT. According to the WSJ, recently “India issued notices to foreign investors to retroactively pay a tax, known as the [MAT] that they hadn’t paid in the past. Mr. Jaitley had indicated in an interview with a local television channel that the tax could raise $6 billion.”

Jaitley and India have walked back from that initial proposition under critical duress from investors. The MAT is scheduled to be reviewed by the Indian Supreme Court and, according to Jaitley, “the government has enacted a law saying MAT won’t apply to foreign institutional investors from April 1, 2015,” reports the WSJ.

A happy resolution to the MAT will restore the confidence of global funds that have made substantial investments in India’s economic growth.

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

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