| US may soon get a leash on Indian financial institutions |
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New Delhi, 24 April Imagine this: Having moved to the US on awork visa, you have become a taxpayer there. But you have not closed your savings account with State Bank of India and a demat account with its subsidiary. Both you and your bank/ broker would soon be required to report this to the Internal Revenue Service ( IRS), the US tax authority. The Securities and Exchange Board of India ( Sebi) is giving finishing touches to a draft inter- governmental agreement ( IGA), to be signed between India and the US under the Foreign Account Tax Compliance Act ( FATCA). The three- year- old US law seeks to improve tax compliance involving foreign financial assets and offshore accounts. Under FATCA, US taxpayers with specified foreign financial assets exceeding certain thresholds must report those to IRS. FATCA also requires foreign financial institutions ( FFIs), such as banks, fund houses and brokers, to report directly to IRS information about financial accounts held by US taxpayers, or foreign entities in which US taxpayers hold a substantial ownership interest. These provisions will become applicable to Indian financial institutions once the Indian government signs IGA with Washington under the Act. The law is expected to come into force in January 2014. While the Reserve Bank of India ( RBI) was earlier asked to prepare the draft IGA, Sebi has now sought feedback from market participants on the key changes required to be made in the draft. These suggestions will be forwarded to the Centre for incorporation in IGA. Since the issue is of " vital importance" and, once implemented, will have " impact on the securities market", Sebi has sought specific suggestions from market participants on changes needed in the " text of the Model- 1A of IGA", those suggested in the due diligence procedures for a reporting entity and any exempted entity and product that needs to be incorporated in IGA. Sebi has also called for a meeting of key intermediaries next week to discuss and iron out issues. Ameet Patel, partner, SKP & Co, a Mumbai- based consultant, said: " FATCA will affect anyone who has a relationship with US taxpayers, particularly non- resident indians. There is little awareness among intermediaries. But, once the law is enforced, banks, mutual funds and portfolio management services will have to first register themselves with IRS and then start reporting the numbers periodically." Under FATCA, withholding agents must withhold tax on certain payments to FFIs that do not agree to report certain information to IRS about their US accounts or accounts of certain foreign entities with substantial US owners. An FFI may agree to report certain information about its account holders by registering to be FATCA- compliant. An FFI registered to be FATCA- compliant and issued a global intermediary identification number (GIIN) will appear on a published FFI list. Withholding agents may rely on an FFI's claim of FATCA status based on checking the payee's GIIN against the published FFI list. This list is scheduled to be published monthly, beginning December 2013. |
| BS REPORTER New Delhi, 24 April The tension between the government and the Opposition in Parliament notwithstanding, Finance Minister P Chidambaram today sought the Opposition's cooperation to clear various reform Bills, including those on land acquisition and insurance, as well as a constitutional amendment for the Goods and Services Tax ( GST). At the India Summit organised by The Economist here, Chidambaram said he wasn't in the race for the prime minister's post and given a choice, he would like to either work for the Congress party or travel. He added the United Progressive Alliance ( UPA) government would complete its second term. "We have listed the things we intend to do. We want the land Bill passed; we want the insurance Bill passed with FDI ( foreign direct investment) at 49 per cent. I sincerely seek the cooperation of the principal opposition party and other political parties," he said. Chidambaram also sought the cooperation of various parties to push the GST Bill in Parliament. He said the chances the legislation would be passed during the UPA's remaining term stood at 70 per cent. "GST is possible, but only if the central government and all the state governments, which are now ruled by eight- nine different political parties, are together," the finance minister said. After the constitution amendment Bill is cleared, the central government would table amodel GST Bill in Parliament, while states would table their respective Bills in their assemblies. Chidambaram said as finance minister during the UPA government's first term, he was able to build a consensus on valueadded tax. " I am trying to forge a similar consensus on GST... Now, we have reached a stage where the empowered council ( of state finance ministers) has authorised us to draft a constitution amendment Bill, (and) a normal Bill for introducing GST," he said. The finance minister also listed other targeted reforms. " We want a regulator for the coal sector and the road sector in place; we want a rail tariff authority in place," he said. "We will continue to take small, significant steps. We will also take forward some big ideas. India's economy will continue to reform," he said. Amid the government staring at a high current account deficit ( CAD), the finance minister emphasised the importance of foreign investors. " CAD is indeed high...( it) is more worrying than the fiscal deficit. In 2012- 13, CAD is expected to be $90- 94 billion. The satisfying aspect of this is we have financed it completely, without drawing down our reserves. There have been copious inflows," he said. "We need to open our economy more. We have to give more space for FDI," he said, adding FDI caps could be removed if it was found these were no longer useful. He hoped CAD would be about five per cent in 2012- 13. "Going forward, we will bring it down... The way to do that is to boost exports... If we can conserve oil consumption 10 per cent, we can save $ 17 billion. And, if we can control our passion for gold, we can save many more billion dollars. It's a difficult act, but I am confident with the steps we are taking to encourage inward inflows, we will be able to bring it down," he said. He assured investors that this financial year, the fiscal deficit would be below 4.8 per cent. "As we remove investment bottlenecks, you will find growth picking up. In 2013- 14, growth would be 6.1- 6.7 per cent," he said. He expressed confidence it would rise to seven per cent in 2015- 16, without fuelling inflationary expectations. He added the economy had the potential to grow eight per cent a year, something Prime Minister's Economic Advisory Council Chairman, C Rangarajan, had said yesterday. Chidambaram also said there was a need to take immediate action to increase penetration and coverage of the non life insurance in the country at a function by Dena Bank. FM P Chidambaram at the India Summit conference organised by The Economist, in New Delhi on Wednesday PHOTO: PTI 'FSAs for power firms likely in 2 weeks' Power projects scheduled to be completed by March 2015 could have operational fuel supply agreements ( FSAs) in place within two weeks, PlanCom Deputy Chairman Montek Singh Ahluwalia said during The Economist India Summit. PTI |
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