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Bilateral Current Affairs March 3rd Week 2016
Category : Bilateral Current Affairs
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1) Tax pact with Indonesia in force, will help fight black money

  • Nearly four years after a deal, India has implemented the new double taxation avoidance agreement (DTAA) with Indonesia.
  • With the Centre having notified all provisions of the pact a few days ago, the new agreement will take effect in respect of incomes derived on or after April 1, 2017. The earlier DTAA with Indonesia, signed in August 1987, will cease to have effect.
  • Some of the significant aspects of the new pact include the introduction of a ‘limitation of benefit’ (LOB) clause and provision for exchange of banking information for tax administration purposes. These measures will support India’s fight against black money.
  • Currently, India’s tax treaties with more than 35 countries provide for an LOB clause. Thus, taxpayers would be assessed under domestic tax laws, Saiya said. India has entered into over 80 DTAAs with different countries.
  • A classic example of ‘treaty shopping’ would be the routing of investments through Mauritius, which until recently accounted for a lion’s share of investment flows into India. In the absence of an LOB clause in the India-Mauritius DTAA, investors leveraged the benefits of capital gains taxation under this treaty.

 

2) LOB vs GAAR

 

  • GAAR is subjective and much wider in application and would require approval of the higher authorities before being invoked. However, the LOB clause is more specific, direct and can be applied in a scenario where the entity claiming benefit does not meet the prescribed criterion. There are apprehensions that a unilaterally notified GAAR should not override provisions of a tax treaty.
  • However, the recently notified India-Indonesia tax treaty provides that anti-abuse provisions under the domestic tax law (such as GAAR, in India’s case) can be applied irrespective of the provisions of the tax treaty.

3) India-Bangladesh drill

  • Current Affirs In an attempt to bring in more synergy in coordinated border management, border-guarding forces of Bangladesh and India conducted their first-ever joint exercise in the riverine borders of the Sundarbans.
  • The exercise between the Border Security Force (BSF) and the Border Guard Bangladesh (BGB) commenced with troopers, including dog and bomb squads, from both the forces carrying out joint searches of cargo vessels on the Ichamati River.
  • The second day of the drill called ‘Sundarbans Maithri’ on 13th March was supervised by Inspector General, South Bengal frontier, Sandeep Salunkhe, Colonel Khandekar Farid Hassan, Region Commander BGB onboard the floating border outpost (BOP) Kamakhya.
  • Two floating BOPs of BSF — Kamakhya and Durga —along with BGB Ship Shahjalal were deployed in the waters of the Ichamati along the international border that serves as the international border between the two countries.
  • The officials said the joint exercise would be extended on land as well to make it part of a coordinated border management plan.