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Guest
Column
India Advantages – 60 years of
independence – The Chamber
can play a positive role for Development of Tax Profession and its member
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Introduction
Young India with over half the population below
25 years of age celebrated her 60 years of independence. Former President of
India, Dr. A. P. J. Kalam, in his publication with Y.S. Rajan “India 2020 A
Vision for the New Millennium” has stated as under:–
“India is a nation of a billion people. A nations progress depends upon how
its people think. It is thoughts which are transformed into actions. India has
to think as a nation of a billion people. Let the young mind blossom-full of
thoughts, the thought of prosperity”.
This publication gave me an inspiration to put my thoughts about the vision of
tax profession in the year 2020, when India will be considered as one of the
super power of the world.
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India Advantages
Since 1991, India has concentrated on
development, liberalization process of law and procedure for doing business in
India. Scrapping of Foreign Exchange Regulation Act, introduction of Foreign
Exchange Management Act, Information Technology Act, Right of Information Act,
Money Laundering Act, Value Added Tax (VAT), Limited Partnership Act, are
steps in the right direction to attract foreign investments. Dividend Income
is completely exempt; capital gains in respect of quoted shares of company
which are held for more than one year are also exempt from Income-tax Act.
Corporate tax is only 35%, which is considered as one of the lowest in the
developing countries. Political stability has added advantages for doing
business in India. Whichever Government comes into power, the liberalisation
process and foreign policy remain unaffected. India is the only nation which
has set up “National Knowledge Commission”. We have multi-cultural,
multi-language, multi-religious background, which is truly secular. India has
one of the finest judicial systems, matured tax system and tax administration.
The cost of tax collection in India is only 0.67% which can be considered as
one of the lowest in the world. According to a report by Goldman Sachs
productivity growth will help India sustain over 8% growth until 2020 and
become the second largest economy in the world, ahead of US, by 2050. The
World Bank has ranked India as one of the top reformers worldwide. According
to a report “Doing Business in South Asia 2007” released by the World Bank and
its private sector are, IFC, doing business in India became easier during
2005-06. The report compares business regulations in South Asia with 175
economics around the world. According to a study by Wharton Business School
and Boston Consulting Group, India is on its way to becoming a world class
manufacturer owing to a rapidly changing business environment. According to
the report, India could become a manufacturing power house within the next
five to ten years. According to a study, India has emerged as the most
favoured Private Equity (PE) destination, attracting $ 1239.22 million worth
investments in January 2007, surpassing China and Japan. As the investment in
India increases, the foreign law firms desire to know more about Indian law.
In our country the tax litigation is reducing as on today total pendency of
appeals before the Income-tax Appellate Tribunal is only 80,000, whereas in
the year 1999, it were 3,00,597. When litigation reduces the tax consultants
should think of developing other areas of emerging practice. According to me,
the major emerging areas are, Legal Process Outsourcing, Arbitration
Reconciliation, Wealth Management, Capital Market, Cyber Law, Intellectual
Property Rights, etc.
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Legal process outsourcing
India is recognised as emerging leader in the
Legal Process Outsourcing Industry. This is mainly because of talented English
speaking Lawyers, Chartered Accountants, Computer Education, Development of
Technology, etc. We have 7,50,000 lawyers, 1,20,000 Chartered Accountants. The
court proceedings, tax administration are conducted in English legal opinion
and orders are passed in English. For legal jobs are billed at average $ 500
an hour in US, in India it is billed at an average of $ 100 an hour, hence
considering the cost factor large number of legal out sourcing job is expected
from US alone. Another added advantage between India and United States is the
time difference. There is a day time in India, night in US, hence, Attorney of
US, while leaving the office can instruct his counterpart in India to do a
research on specific legal issues and he can have the complete research done
his table in the early morning. The tax consultants are more suited for the
research work on law.
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Arbitration and
reconciliation
In India, the court proceedings take a long
time, hence, all commercial contracts contains the clause for arbitration. The
Government and Courts are encouraging for setting up the alternative disputes
redressal forum through the process of arbitration. In Chennai, Nani
Palkhivala Arbitration Centre, which was set up in the year 2005 is equipped
with necessary infrastructure it is helping to resolve the disputes within
seven months. The city of Mumbai which is considered as commercial capital of
India has not taken lead in the process of encouragement of alternative
dispute rederessal forum. The tax consultants with their commercial background
and having indepth knowledge of taxation and accountancy are best suited for
rendering the services as arbitrators as well as to make representation before
the forum. The Chamber has the infrastructure and can take a lead to encourage
their members to pursue the new avenue of practice and to set up arbitration
centre similar to which was set up at Chennai. A thought for consideration is
all five professional organisations (AIFTP, BCAS, CTC, STPAM and WIRC of ICAI)
can join together and can plan a world class arbitration Centre at commercial
capital of India, which will helps immensely for benefit of tax profession.
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Wealth management
Wealth Management requires research and indepth
knowledge of taxation law. There are few consultants, who are advising on
Wealth Management. When inbound investment increases we require team of
professionals who can render wealth management services to investors as well
as to corporate and firms. This being one of the emerging and developing area
of
practice, the tax consultants are best suited for the job.
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Capital market
Capital market is in the stage of infant.
Government has framed many regulatory laws and it is ongoing process. Very few
law firms, which have developed the practice in the law relating to Capital
Market. The tax consultants, who are well versed with the company law and
taxation are best suited for the job. The Tax Consultants can progress well,
if they decide to pursue to specialisation in the area of law relating to
Capital Market. The proceedings before the adjudicating authorities and SEBI
Tribunal is similar to tax proceedings before the authorities and Tax
Tribunal.
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Cyber Law
Cyber Law is one of the emerging areas of
development of practice. The young lawyers can specialise and try to develop
the practice. In the years to come, we require the lawyers who are specialised
in the law relating to Cyber Crime, Money Laundering Act and Information
Technology Act.
There are special cell created by the State Government to investigate the area
relating to Cyber Crime. The Chamber can have an interactive meeting with the
concerned authorities to understand the consequences and a some of the members
may specialise in the respective area.
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Intellectual Property Rights
Intellectual capitalism plays a significant
role in shaping the progress of a country in modern era. The enhanced
potential of a country greatly depends how far it is enriched with its
intellectual properties and to what extent it is in a position to exploit it
commercially. The law relating to intellectual property is one of the modern
branches of law that is seriously catching attention all over the world. India
has vast potential with its intellectual capital. This is one of the emerging
are of practice which Tax Consultants can develop.
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Role of the Chamber
Today is the era of specialisation and
globalisation. One will not be able to specialise in all branches of law. One
has to decide which is the area which he or she intends to practise and has to
decide the practice. At present, the Chamber is conducting the lecture
meetings and seminars only in respect of tax related issues, which is the
immediate need of the members. It may think of organising the seminars or
workshops in respect of emerging areas of practice, such as Legal Outsourcing,
Capital Market, Cyber Law, Intellectual Property Rights, etc., which may help
its members to think about emerging area of practice. We are in the era of
Information Technology and world is considered as one global village. In the
era of Information Technology, there is no boundary, entire world is your
neighbour.
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Conclusion
When the investment from USA and other
countries increases, the entrepreneurs do require correct advice from tax
consultants of India. Similarly, when Indian entrepreneurs make huge
investments at US and other countries they do require correct advice from the
USA lawyers. The question to be asked by ourselves is, Are we in a position to
render legal services which the USA lawyers desire from us? My answer will be
no. As a Tax Consultants, we are only dealing with taxation aspects of
investments, however, the investor requires advice in respect of FEMA, SEBI
Regulations, etc. Most of our practices are individual practice and we do not
have big set up, hence, may not be possible for us to render required service.
To render service to big clients we have to become big and we should be in a
position to render all services under one roof. As an enthusiastic lawyer in
the year 1991, with the help of my 7 friends we formed a company called “India
Consultancy Group” to render all services under one roof. The company was
addressed by eminent personalities including the super star Mr Amitabh
Bachchan at Hotel Taj. We have rendered services for mergers, acquisitions,
business restructuring, etc. However, we could not achieve the desired results
due to following factors:-
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We were not sitting in one
place; hence, it was difficult to manage the work within time schedule.
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All of us were had only
taxation background, hence, we have to depend upon others to get the correct
advice in respect of other area of practice, which was taking considerable
time.
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We were ahead of time; 15
years back the concept of services under one roof was not acceptable,
whereas today, it is the need and necessity.
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Two of my colleagues, who
were back bone of the company got a good opportunity in the corporate,
hence, they resigned from the board, which made us weak.
According to me, today is the right opportunity to develop the corporate
culture to tax practise and move with the time without compromising on value
and ethics of profession. I am sure we can build a big tax consultancy group
of more than 1,000 professionals sharing their knowledge and experience
under one roof, which may benefit to all the members of The Chamber of
Consultants. These are my thought for debate and development of tax
profession and members of the Chamber.
Members may share their view and I always believed in the process of
learning.
Jai Hind.
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