Sunday, August 21 2005 15:03 Hrs (IST) - World Time -

New Delhi: In a bid to make India's tax policies more compatible with the rest of the world in the era of globalisation, FICCI today (August 21, 2005) proposed a slew of tax reforms, including abolition of Fringe Benefit Tax (FBT).

"Tax reforms have become imperative as India faces new challenges due to increasing cross-border trade, proliferation of free-trade agreements and WTO commitments to promote trade and commerce," the industry chamber said.

It said the new challenges have brought to the fore international taxation issues like tax havens, transfer pricing, tax treaties, e-commerce, software taxation and withholding tax.

On FBT, the chamber said the intention of the government has been to move towards ASEAN level of tax rates and none of the countries in the region has FBT.

"Why should we then deviate and adversely affect the competitiveness of our industry?" the chamber questioned.

FICCI also suggested to lower the corporate tax rate to around 25 per cent, saying the existing effective rate stands at 33.66 per cent for domestic companies and 41.82 per cent for foreign companies.

The chamber said smaller companies should be taxed at lower rates as is the position in the United Kingdom.

It further said a roadmap for national Value added Tax (VAT) should be laid down with total incidence of 20 per cent comprising 12 per cent CENVAT and eight per cent state-level VAT.