WHILE addressing the delegates from 30 OECD countries and CBDT officials here at Vigyan Bhawan, the Union Finance Minister, Mr Pranab Mukherjee, has called for strong measures to reverse the ongoing trend of illicit outflows from developing countries and exploitation of their natural resources through abusive transfer pricing schemes. Mr Mukherjee said that this abusive behavior has been robbing developing countries of their scarce resources, which is required for financing of developmental programmes.

Mr Mukherjee said that India and OECD can partner in this process. He said that transfer pricing continues to be an important tax issue due to high increase in cross border trade taking place within multinational enterprises located in developed, developing and undeveloped countries. He said that these challenges of new global environment will have to be addressed through bilateral and multi-lateral cooperation.

The Finance Minister was speaking at a high-level two-day International Seminar on “Adapting Tax Systems and International Tax Rules to the New Global Environment : A Shared Challenge for India and the OECD”. This International Seminar is being organized jointly by the Ministry of Finance, Government of India and OECD. Mr. Angel Gurria, Secretary General, OECD, is also participating in the event.

The FM said that the rising disputes in international tax matters is another area of challenge, which requires due attention. He said that due to linkages in global economy, the tax disputes have assumed a multilateral character, involving multiple countries. The present scheme of Mutual Agreement Procedure (MAP) will be required to align to address this need, the Minister added. The Finance Minister stated that there is a need to think of a multilateral tax convention to address this issue of multi-polarity.

Mr Mukherjee emphasised that tax competition driven by the presence of tax havens has created an unhealthy situation that has helped individuals to park substantial undisclosed income outside their countries. He said that this is also true in case of some Indian citizens and residents, in the process denying legitimate tax revenues to the country. He said that the Government of India has committed to vigorously pursue all the necessary steps in coordination with countries concerned on this issue.

In the Seminar, the OECD and India announced plans to strengthen ongoing co-operation on tax related issues through the development of a three year partnership that will provide greater opportunities for structured dialogue and sharing of information. The three–year programme will broaden technical co-operation on tax matters, extend high-level policy dialogue between India, other emerging countries and the OECD, and deepen India's participation in the OECD Committee on Fiscal Affairs and it's subsidiary bodies, toward the eventual goal of becoming a full participant in the Committee. It will cover a range of issues over the coming three years, including improving tax administration, adapting transfer pricing and tax treaty rules to the new international environment and better understanding of the linkages between illicit flows and tax evasion. This programme will also enable India to access OECD's work on Tax and Inequality, on the application of VAT/GST to cross border services and looking at issues relating to aggressive tax planning and harmful tax practices.