Monday, November 19, 2018

Tax predictability and clarity required for $1 Tn Digital economy by 2022
Friday, December 8, 2017 - 1:44:20 AM - By News Bureau
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Subhash Garg, Secretary (DEA), MoF
NEW DELHI : In a report titled “Taxation of the Digital Economy: Impact analysis for India”, the Internet and Mobile Association of India [IAMAI] has suggested predictability and clarity of tax provisions to ensure the digital sector reaches its potential of $1 Tn by 2022.

The report, jointly developed by Nisith Desai Associates and launched by Sri Subhash Garg, Secretary (DEA), MoF, maps the different tax issues affecting companies at various stages of their business cycle (Early stage, Over the Operating Life and Exit stage) with explanation of the concerns involved with each provision pertaining to the company’s operations at that stage.

“Consistent and predictable taxation policies will encourage growth of the digital economy. The digital sector is highly dependent upon (a) Investments from abroad in the form of FII/FDI and (b) technology transfers which often takes the form of IP transfer/sharing in this sector. Both these factors have historically been extremely sensitive to the taxation regime of the host countries as reiterated by the ‘Doing Business Report’ by the World Bank. The digital industry recognizes the importance of tax collections and the responsibility on all citizens and businesses to pay tax. However, it is important to ensure that there is ‘certainty’ and ‘clarity’ on implementation of the tax statutes. It is also important to ensure simpler tax compliance regime in order to further India’s Global ranking in ease of doing business.”

The report discusses various concerns like Characterization of income, Angel Tax, Taxation of ESOPS and Minimum Alternative Tax [MAT], PE, Equalisation Levy, Sales below FMV, merger, demerger and acquisitions, GST and various other such issues that affect digital businesses.

The report suggests that rationalising tax provisions will encourage growth of the sector, which in turn will help raise total tax revenues from this sector. “It must be reiterated that any rationalization of tax provisions that in the long run encourages growth of the sector only goes on to raise future tax revenues for the government as well. Therefore, the authorities need to share a long-term vision for the digital sector as far as tax revenues from the sector is concerned and try to ensure that Indian tax regime for the digital sector is both investor friendly as well as start-up friendly. This will go a long way in ensuring an indigenous Digital Sector that can realize its potential of emerging as a global leader in the sector in the near future.”

The Internet and Mobile Association of India (IAMAI) is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was established in 2004 by the leading online publishers but, in the last 13 years, has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, ecommerce ad mobile and digital payments among others.

Thirteen years after its establishment, the association is still the only professional body representing the online industry. The association is registered under the Societies Act and is a recognised charity in Maharashtra. With a membership of nearly 300 Indian and overseas companies, and with offices in Mumbai, Delhi, Bengaluru and Kolkata, the association is well placed to work towards charting a growth path for the digital industry in India.
Subhash Garg
Secretary (DEA)
Govt of India
Nisith Desai Associates
Taxation of the Digital Economy: Impact analysis for India