India set to back Saarc tax treaty

NEWDELHI: India is set to break new ground in international tax agreements as well as in its relations with Pakistan, by forging, for the first time, a multilateral tax treaty among the six neighbouring countries in South Asia.

The proposal for a multilateral tax treaty to bolster flow of capital and investment within the region will be considered by the Union Cabinet on Wednesday.

Saarc members had finalised the broad contours of the agreement on avoidance of double taxation and mutual administrative assistance at Islamabad in December last year.

“Collection assistance� is one of the most significant provisions proposed in the agreement. This would ensure recovery of taxes from defaulting companies that have assets outside India. The arrangement is reciprocal.

The treaty — which will be a limited one to start with — is a precursor to a comprehensive multilateral tax treaty among Saarc members. Among Saarc members, India has double taxation avoidance treaties with Bangladesh and Sri Lanka. It does not have bilateral tax treaties with Pakistan, Bhutan and Maldives.

A multilateral tax treaty could give added advantages to companies operating in this region, given the increasing focus on economic co-operation among Saarc.