'India should partner with Australia to bring clarity in tax policy'

MELBOURNE: India should closely partner with Australia at the upcoming G20 summit to bring about a clarity in tax policy to prevent money laundering and to undermine the black economy, an Australian think tank has said.

Australia has been correct in pinpointing that there was a need to know that governments will not change or tinker with the rules after investments were made by investors and that tax systems be reinforced to ensure fairness, a research paper 'The G-20: Challenges and opportunities Ahead' by Australia India Institute said here.

"Clarity in tax policy is essential to prevent money laundering and to undermine the black economy. Avoidance of legitimate tax through transfer pricing and other strategies should be stopped," the paper said.

"India should underpin this Australian initiative through its own assent and also by not changing investment rules and tax policies retrospectively," it said ahead of the G-20 summit to be held in Brisbane on November 15 and 16.

"Structural reforms and attracting investment in infrastructure are essential to move India to a higher growth path. Investment is important considering India's abundant demographic dividend," the paper said.

"Australia can serve as a natural partner for India by providing the capital required for both social and physical infrastructure," it said adding India's long drawn out power shortage was due to end with the two sides inking a civil nuclear deal recently.

The return on capital (real rate of interest) in Australia is low and Australian capital will have better returns when invested in physical infrastructure in India, the paper pinpointed.

"As the level of capital already deployed in India is low, the return on additional capital investment will always be higher in India than in other ASEAN countries or in China," it said.

"There is therefore value in this partnership. And indeed, Australia-India cooperation has gone beyond energy to areas ranging from defence collaboration to science, water, education and skills. Australia's formula for growth through public-private partnerships merits the support of other G20 economies, both advanced and emerging, including India," it added.