ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Risk-based Audits for Transfer Pricing

In view of the serious risk faced by the Indian exchequer on account of illicit financial outflows via transfer mispricing practices by multinational corporation–affiliated firms, an appropriate tax policy path shall be oriented towards a more thorough and stricter scrutiny of their transactions in future. The current policy approach of minimising the tax audits faced by these firms based on initial risk assessment should ensure careful profiling of risks and strategic audit design considering various risk factors.

Pursuing FDI for Technology

The discussion paper on “Industrial Policy 2017” floated by the Department of Industrial Policy and Promotion has stressed promoting the transfer of foreign technology as one of the key priorities with respect to the existing foreign direct investment policy regime. However, the focus remains on ensuring enhanced access to technology. This may not lead to technology transfer owing to several restrictive conditions imposed on the usage of technology by the licensor. For gaining real acquisition of technology, a purposive policy intervention is required through regulatory supervision of costs and conditions negotiated in technology collaboration agreements.

Current Account Fallout of FDI in Post-Reform India

Examining trends of foreign exchange use of a consistent sample of foreign affiliated manufacturing firms over the post-reform years, it is found that these firms have a tendency to cause net foreign currency losses at the aggregate level, as well as at the firm level. A shift in preference for outflows through finished goods imports and intangible transaction payments is noted. The firm-level expense intensity has risen for different routes as well, while the export intensity did not vary significantly over the period. The propensity towards foreign exchange use was dissimilar in various ways for comparable local firms. Such patterns raise serious concerns regarding the impact of foreign direct investment on current account of India's balance of payment in direct and possibly shielded ways.
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