With many Indian companies opening subsidiaries abroad, industry chamber FICCI on Sunday asked the Finance Ministry to frame tax policies in its proposed Direct Taxes Code in such a way that these firms are encouraged to repatriate their earnings into the country in the form of dividends or capital gains.
The Federation of Indian Chambers of Commerce and Industry (FICCI) also suggested to the Finance Ministry to create a conducive tax environment for overseas companies having subsidiaries in India.
The FICCI's wish list has been prepared in view of the rising share of foreign direct investment (FDI) in the gross domestic product. In 2007-08, the economy is expected to clock a foreign trade turnover of over $350 billion and FDI inflows are targeted at $30 billion, the chamber said.
Pointing out that the proposed goods and services tax from 2010 would increase the competitiveness of the industry, the chamber asked the authorities to structure the new levy in such a way that the combined indirect taxes on goods and services do not exceed 20 per cent.
The Finance Ministry has proposed to bring simpler income tax and other direct tax laws for public comments by December-end.
A number of Indian firms have established subsidiaries worldwide, but they do not bring into India their dividends or capital gains from the sale thereof, as that is taxable in the hands of Indian holding companies at the normal rates, FICCI said.
This is subject to the credit of tax paid by them overseas, which at times is less, particularly in tax heaven countries, the chamber said.