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India's GST -- A Decade Late, in the Nick of Time

Posted on August 8, 2016 by Stuart Gibson

India has just taken a giant step toward bringing its outdated and wholly inadministrable system of indirect taxes into the 21st century. Last week the Rajya Sabha, the upper house of Parliament, unanimously agreed to amend India's constitution to provide for a coordinated national and state goods and services tax. That new GST, expected to take effect next April, will replace a complex patchwork of national, state, and local levies that have all too often brought Indian interstate commerce to a halt.

Two years after taking office, Prime Minister Narendra Modi stands poised to oversee the enactment of the biggest tax reform in the country's history. If adopted by the Lok Sabha, the lower house of Parliament -- which had already approved the measure last year -- and ratified by a majority of states, the new national GST would move India's tax system from a loosely knit fabric of local VATs to a streamlined and coordinated national and state system designed to efficiently generate and distribute revenue.

This development, coming 13 years after a commission first recommended that India move to a coordinated GST, represents a victory not only for Modi and his political allies. It also reflects a growing acknowledgment among local government and business leaders that the current outdated system hampers India's economy and places a ceiling on potential growth. Thus, while much work remains to turn the legislative blueprint into the laws and regulations required to implement the new regime, the country's professional and business communities are optimistic about the future.

French tax authorities recently provided to Israel a list of more than 8,000 Israelis with undisclosed bank accounts at HSBC Switzerland. That list follows an earlier disclosure of Israelis with undisclosed accounts at UBS. Following the example set by the United States' successful voluntary disclosure initiatives, Israel will offer individuals on the lists the opportunity to voluntarily disclose their assets and pay back taxes, in exchange for not being criminally prosecuted.

Efforts to improve tax transparency, while generally moving forward, have faltered in a number of countries. France recently closed to public view its website listing beneficial owners of trusts, citing privacy concerns. The website, which went live on June 30, provided a glimpse into the secret world of opaque entities, most recently exposed in the leak of the Panama Papers. But according to practitioners, trusts are not commonly used in France as they are in the U.S. and elsewhere.

Panama has enacted new measures that would authorize it to retaliate against any nation that jeopardizes its commercial and financial interests. While some believe the law is intended to target Colombian tariff practices, it may still come into play should nations try to punish Panama for tax transparency failures brought to light by the Panama Papers leaks.

Just when it appeared that the two convicted LuxLeaks whistleblowers would have a clean path to appeal their guilty verdicts, Luxembourg prosecutors filed their own appeal, challenging the acquittal of Edouard Perrin and the suspended sentences imposed on Antoine Deltour and Raphaël Halet. The appeals highlight not only the potential abuses of prosecutorial power, they also show why the European Union must act soon to protect whistleblowers.

As the world turns its attention to the Olympics in Rio de Janeiro, it is only fitting that Tax Notes International also focus on Brazil and the rest of Latin America. The August 15 issue will feature coverage of tax issues in that part of the world, ranging from Mexico to Brazil and Argentina.

Stuart Gibson is editor of Tax Notes International.