Is it Time to Re-think the Indo-US Double Taxation Avoidance Agreement?

• Autores: H. Prashanth Reddy
• Localización: Intertax, ISSN 0165-2826, Vol. 36, Nº. 12, 2008, págs. 568-576
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • In 1959 India attempted to enter into a Double Taxation Avoidance Treaty with the United States of America. The US Senate however rejected the treaty because the Indian Government had inserted into the treaty a provision regarding ‘tax sparing credits’. This provision would have enabled US Companies to claim credit, in the US, for taxes which were waived by the Indian Government as part of investment incentives. Such a provision was vital for the transfer of capital and technology to a developing country like India. In 1990 however when India was in the throes of a financial crisis it was compelled to entered into a DTAT with the US in order to attract FDI from the US The DTAT which has been based on a residence principle has resulted in an inequitable revenue distribution, favouring the US. This article seeks to explain how exactly this treaty results in an inequitable distribution of revenue as also the several reasons for the Indian Government to renegotiate the treaty to ensure that it is based on the more equitable source based principle.