Enhanced relationship in developing countries depends on trust, confidence and transparency

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Enhanced relationship in developing countries depends on trust, confidence and transparency

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Questions about what the concept of the enhanced relationship between taxpayers, officials and advisers should look like in developing countries, whether the idea would encourage voluntary compliance by taxpayers and what steps should be taken to enhance such a relationship, were raised during a panel discussion at the Foundation for International Taxation’s annual conference in Mumbai on December 6.


Marc Levey, a transfer pricing partner with Baker & McKenzie in New York, opined that transparency by a taxpayer with the revenue team will help developing the relationship between the two. Further, he stated that a lawyer / consultant is a connecting thread between taxpayer and administrator, so he has to understand the perspectives of both of them to help build an ‘enhanced relationship’.

Bela Mao, head of tax in India for Shell, opined that an enhanced relationship would encourage voluntary compliance by taxpayers. She also believed that if taxpayers are honest, then the revenue authorities will also look at situations pragmatically. She further stated that enhancing relations would have the effect of reducing litigation to a certain extent.

Shanker Iyer, of the Iyer Practice in Singapore, shared his experience of the Singapore revenue authorities. He described it as a very authoritarian regime in early days. The revenue authorities were neither approachable nor could be questioned. But over a period of time, he noticed changes in their attitude. He stated that they are much friendlier and approachable now.

Trust and confidence
Kamlesh Varshney
, head of the India Tax Department’s APA progamme, gave his organisation’s perspective on the enhanced relationship. He explained that it works both ways. “We have to move forward to build trust & confidence,” he said. He gave an example of a UK company being boycotted by its customers for not paying taxes. He emphasised that such a change in culture should take place in a developing country too. The attitude should be “It’s an honour to pay taxes”. He also said he supported the exchange of information, which he said will help enhanced relationship between countries.

Bijal Ajinkya, a partner at Khaitan & Co, emphasised that cooperation by taxpayers is something that will enhance relations. She added that a taxpayer should explain their business well to the tax authorities in light of various complexities in tax structures. The revenue should also be able to discuss the judicial approach with the taxpayer. “We need then to come to common understanding between the two. This will help build an enhanced relationship,” she said.

Ajay Vohra, managing partner of Vaish Associates, who chaired the panel, supported the arguments of the panellists and stated that the revenue officers in charge need to be educated.

Click here to read the rest of Taxsutra’s coverage of the FIT international conference.

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