Brexit’s shadow: India vows to deepen ties

Highlights of 9th UK-India Economic and Financial Dialogue between Finance Minister and U.K. Chancellor
  • Commitment to strengthen economic cooperation and collaborate on cross-border tax evasion and avoidance.
  • Both the side agreed to collaborate in determining the status of wealth deposited in foreign financial accounts by nationals of both countries.

Commendable moves from both the side:

  • National Highways Authority of India’s proposal to issue a masala bond in London .
  • IREDA’s plans to issue a green bond in London and list their masala bonds on the London Stock Exchange within six months.
  • Recent introduction of a fast-track investment promotion mechanism, which provides a single window for U.K. companies that are looking to either establish or expand their business in India.
  • Encouraging timely implementation of the G20/OECD Base Erosion and Profit Shifting Project outputs and called on other nations to meet their commitments.
  • The exchange of information between the U.K. and India under the Common Reporting Standards on Automatic Exchange of Tax Information will begin this calendar year.

Basic information:

What are Masala Bonds?

  • Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency.
  • Unlike dollar bonds, where the borrower takes the currency risk, masala bond makes the investors bear the risk.
  • Masala bonds will help to internationalize the Indian rupee and also deepen the Indian financial system.
  • By issuing bonds in rupees, an Indian company is shielded against the risk of currency fluctuation, typically associated with borrowing in foreign currency.
  • Cost of borrowing could also turn out to be lower than domestic markets.

What are Green Bonds?

  • Green bonds announces the purpose for raising the capital- to fund ‘green’ projects, which typically include those relating to renewable energy, emission reductions and so on.
  • Green bonds typically carry a lower interest rate than the loans offered by the commercial banks and are not risky too, as the bonds are tied to the insurer and not the successful implementation of the projects. 

National Highway Authority of India

  • Autonomous agency of the Government of India
  • Responsible for management of a network of over 70,000 km of National Highways in India.
  • It is a nodal agency of the Ministry of Road Transport and Highways.

IREDA: Indian Renewable Energy Development Agency Limited

  • Mini Ratna (Category – I) Government of India Enterprise under the administrative control of Ministry of New and Renewable Energy (MNRE).
  • IREDA is a Public Limited Government Company established as a Non-Banking Financial Institution in 1987 engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy efficiency/conservation.

BASE EROSION and PROFIT SHIFTING PROJECT OUTPUT:

Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.

Tax Evasion and Tax Avoidance

  • Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions.
  • In contrast, tax avoidance is the legal use of tax laws to reduce one’s tax burden. Both tax evasion and avoidance can be viewed as forms of tax noncompliance, as they describe a range of activities that intend to subvert a state’s tax system, although such classification of tax avoidance is not indisputable, given that avoidance is lawful, within self-creating systems
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