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Asia Pacific Tax Forum - Delhi Meet - An enriching experience
JUNE 02, 2015
By Sumit Dutt Majumder
THIS piece is on an event which is worth remembering in many ways. The event was the Twelfth Asia
Pacific Tax Forum (APTF) held in Delhi in May 2015. I have been attending the APTF since 2010, when
the Government of India nominated me to speak at the seventh APTF at Angkor Wat, Cambodia. Since
then I have been attending the APTFs as a featured speaker on special invitation from the APTF. I can
say with conviction that the APTF Delhi has been the most delivery-oriented and the star-studded forum
that I have seen so long. Three highly acclaimed international tax experts under one roof - Dr. Jeffrey
Owens, formerly of the Organization for Economic Co-operative and Development (OECD), Mr. Dave
Hartnett, former Chief of the Her Majesty's Revenue & Customs, (HMRC) and Prof Sijbren Cnossen, a
highly respected expert on VAT/GST. Besides, the audiences also heard Dato Subromaniam Tholasy, the
senior officer responsible for implementation of GST in Malaysia from 1st April this year. The forum was
also addressed by senior government officials from Indonesia, Malaysia, Australia, Philippines, Thailand,
Myanmar, Cambodia and Lao.
First, a few words about the APTF and the International Tax and Investment Centre (ITIC) Washington
D.C. It is an independent non-profit research and education foundation that serves as a clearing house
of information on best practices in taxation and investment policy. The ITIC organizes four regional tax
forums annually to create a neutral table that brings together all stakeholders i.e. Government,
Industry and Academia. The participants do not always agree, but they share knowhow, mutual
understanding and build trust. The other three tax forums are Middle East / North Africa Tax Forum,
Eurasia Tax Forum and Africa Tax Forum.
Some of the key issues discussed in the Forum were extremely relevant in the current Indian context.
There were three sessions on GST - the first one on "Introduction of GST/VAT - A comparative
"Analysis." It was chaired by Prof. Sijbren Cnossen. Mr. Rajiv Dimri was the Presenter. The panelists
included Dato Subromaniam Tholasy (Malaysia), Mr. Leigh Obradoric (Australia) and me. The second
one was on "Advance issues in GST in the Asia Pacific region". This session saw some intense
discussions between Prof Cnossen and Mr. R Sridhar of Hindustan Coca Cola on the implementation and
coordination issues in GST. The third session was on "Common Challenges in the Food and Beverage
Sector During Introduction of GST."This session was again chaired by Prof. Cnossen, and I was the
presenter. During all these three sessions, Dato Subromaniam, the man behind the Malaysian GST
enlightened the gathering on the steps leading to the implementation of GST in his country from the 1st
April this year and the initial implementation issues. As expected, Prof Sijbren Cnossen clearly showed
how a Ustad (master) deals with his subject - complicated policy issues were explained in a simple
manner, views were expressed clearly with the ‘no nonsense' approach, and above all, very erudite
and yet so modest. Being with him for those three days was a wonderful learning process.
A few more words about the three sessions on GST. After hearing the presentation on India's GST, Prof
Cnossen expressed firm views on certain critical issues. Firstly, he was of the opinion that Petroleum,
Real Estate and Alcohol must be brought within the ambit of GST at the beginning itself. There could be
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separate Excise Duty and State VAT in addition to GST on Alcohol, it being a 'demerit good'. He also felt
that the 'threshold' should be kept high - he was talking about Rs.75,000/. The reason he gave was
that the administering of Small Business was cumbersome and not at all cost-effective. He fortified his
arguments by stating that the best opportunity to have a good GST is at the beginning when the GST is
introduced. Once the GST is in place, attempts to change it tend to be futile. It was explained during
the discussions that India's federal democracy compels certain compromises in terms of acceding to the
States' demands arising out of their apprehension about loss of revenue after introduction of GST. In
the scheme of things of India's GST there is enough scope to do the course corrections in near future,
when the fear of loss of revenue proves unfounded.
Dr. Jeffrey Owens, the former OECD expert on International Taxation issues spoke eloquently in the
session on "Action Plan for BEPS - Current Developments and Implications." The other speakers
included Mr. Astera Primanto Bhakti, Assistant Minister of Finance, Indonesia, Mr. Hamish Mcdonald
from Australian Treasery and Mr. D.P. Sengupta, former Chief Commissioner of Income Tax, India. A
current view on the Base Erosion and Profit Sharing (BEPS) developments and the policy issues they
raised for both taxmen and taxpayers in the AP region were presented by the speakers. The panelists
also addressed the Capacity Building and coordination needs in the AP region to meet the requirements
coming out of G-20. Mr. D.P. Sengupta succinctly explained the views from the standpoint of the
developing countries, and one heard an enlightening debate between Dr. Jeffrey Owens and Mr.
Sengupta.
Another star-studded session was on "Growth-oriented Tax Policy: the role of Tax Incentives." Dr.
Jeffrey Owens was the Presenter, Prof Cnossen was a Panelist and Dr. Didik Rachbini, Member National
Economic Committee, Indonesia was the Moderator. Dr. Warotai from Ministry of Finance, Thailand and
Mr. PO Sandap, from the Ministry of Finance, Cambodia were the panelists. This session examined the
issues and challenges in the application of tax incentives in the context of policy reforms in the AP
Region.
Mr. Dave Hartnett, former Chief of HMRC, UK enthralled the audience in the session on "Reforms in
Dispute Resolution Processes." Mr. Wayne Barford, formerly of Australian Taxation Office was the
Moderator. The Panelists were Mr. Mukesh Butani from India, Ms. Lilia C. Guillermo from the
government of Philippines, and MR. Rogier Rolink from Shell. The session examined the ongoing
reforms worldwide in how tax administrations handle disputes and the overall Dispute Resolution
Process. The Panelist also explained the development, regarding Dispute Resolution in India, Philippines
and Australia.
Then, there was a session on "Tax Administration Reforms in AP Region." Mr. Dave Hartnett was the
Moderator while Mr. Wayne Barford was the presenter. The Panelists included Ms. Lilia, Mr. U Tet Htut
Aung from Myanmar Mr. Saythong.O from the Ministry of Lao, Peoples Democratic Republic, and me.
This session discussed the experience of tax administrations reform in the different parts of AP Region.
It also examined the impact of tax policy and the role of ICT as part of the reforms. Mr. Dave Hartmatt
stressed on the precept that before embarking upon a major tax reform, the government must bring
out a high quality consultation document for extensive consultations with all stakeholders. Even the
draft laws and rules arising out of the reforms must be put in the public domain well in advance. It is
also important to get an Impact Assessment (IA) done for the proposed reforms, and the draft IA
should be shared with the taxpayers for their feedback. After finalizing the laws and rules in
consultation with the stakeholders, the Government should publish 'Guidance on Application of Law' and
publicize it. The government has to win the taxpayer's trust, Mr. Hartnett explained. These precepts
would be most relevant in the context of introduction of GST in India- particularly with respect to the
requirement of the relevant documents to be put in public domain and getting the feedback of the
taxpayers.
Mr. Hafiz Choudhury, Senior Advisor, ITIC was the facilitator in the session on "Transfer Pricing Capacity
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Development for key issues relevant to the AP Region." Mr. Choudhury made a detailed presentation on
the Action Plan for BEPS relevant to the Transfer Pricing Issues in the context of the available capacity
and skills at tax administrations in the AP Region, and options for future implementation of these goals.
The session also evaluated the scope for better coordination of work between the Direct Tax and
Customs. The panelists included Mr D.P. Sengupta and me. Mr. Sengupta explained the issues raised by
Mr. Choudhury, from the perspective of developing countries. I explained the Customs Valuation
treatment of Related Party Transactions, and pitched for convergence between the Tax and Customs
Laws in this area. It was explained how it was unfair to arrive at different values for the same
transaction by the two tax authorities. Customs wants to peg the value high, while the Income Tax
authorities prefer lower value to arrive at higher profit. It was however recognised that the two laws
being guided by two international codes, this would need to be sorted out between WTO and OECD.
There was also a session on potential benefits in 'Coordination in Indirect Taxation and Regional
Cooperation' with a case study discussion on 'Automotive Taxation'. Prof Cnossen was the Presenter.
The Panelists were Mr. Wannawat Karunanant from the government of Thailand and Mr. Janesh Baweja
from India. Prof. Cnossen explained the global framework for such cooperation.
A session on "Wider Stakeholder Community in Tax Reforms" chaired by Mr. Daniel A. Witt, President
ITIC brought together a wider range of stakeholders in the tax policy process from both within and
outside the Ministries of Finance so as to give their perspectives on how the tax policy is viewed in that
wider context. The Panelists included Senator Juan E.M. Angara, Chairman Senate Committee on Ways
& Means, Senate of the Philippines, Dr. Fadel Mohammed, Chairman of Commission XI, Parliament of
Indonesia, Mr. Dave Hartnett and Dato Subromanium Tholasy.
Mr. Daniel A Witt also chaired a session on "The design and impact of Tourism Related Taxes and Fees."
Mr. Leigh Obradovic was the Presenter, and the Panelists were Senator Juan E.M. Angara, Mr. U Tet Htut
Aung, Mr. Po Sandap and Dr. Warotai K. This session examined the taxes and fees that affect tourism, a
significant component of economic activity in many Asia Pacific Countries. It also explored the ways and
means as to how an efficient regime can be designed to maximise the revenue potential while not
creating disincentives for investment in tourism.
Another highlight of the APTF Delhi was the release of "Asian Excise Tax Reforms: A Resource Manual."
This has been prepared jointly by the APTF expert team and the Ministry of Finance Policy Makers from
ASEAN States. The purpose of this Resource Manual is to serve as a resource for policy makers and a
roadmap to excise tax reform that is simplified, equitable and non-discriminatory. It is intended to help
answer the question: 'how should we reform our excise regime as ASEAN becomes more closely
integrated?' Such standardization will become increasingly important as the region moves towards the
Asian Economic Community (AEC) which is due to commence on 31st of December, 2015. As Mr. Daniel
Witt and Mr. Hafiz Choudhury explained, this Resource Manual, although specific for ASEAN Countries, it
will be of relevance and useful to all the countries of APTF, including India.
It's also worthwhile to mention that Mr. Shailendra Kumar, the Founder Editor of TIOL took the
opportunity of interviewing Prof. Sijbren Cnossen, Dato Subromanium Tholasy, Mr. Daniel A. Witt, Mr.
Hafiz Choudhury and me in the sidelines of the APTF on various issues relating to APTF Delhi and the
GST. These videos in TIOL Tube are as follows:
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simply inTAXicating - Tax Manthan
(Episode-1)
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simply inTAXicating - Tax Manthan
(Episode-2)
This piece on APTF, Delhi will remain incomplete if mention is not made of an unsavory and avoidable
incident, just a few days before the event was to start. A ‘health activist' NGO based in Bengaluru
filed a Writ in the Delhi High Court requesting the Court to bar the Ministry of Finance Officials of India
from participating in the APTF Delhi on the ground that the APTF Delhi was sponsored by Tobacco
Companies and that the Tobacco Tax related issues would be discussed in the Forum to influence the
Government policy making on tobacco taxation issues. The NGO further asserted that the Ministry's
participation would be a violation of the Framework Convention on Tobacco Control (FCTC), since the
ITIC has some multinational tobacco companies out of many of its sponsors. Mr. Daniel A Witt, the ITIC
President had in his Welcome Speech stated in no uncertain terms that there were no tobacco related
issues in the Agenda for the APTF Delhi, and that no tobacco company had sponsored the APTF Delhi,
and therefore the Ministry's participation in APTF Delhi could not even remotely be considered a
violation of FCTC. Meanwhile, in the High Court, the counsel for the Government of India duly defended
the Government's right to participate in the said APTF, and asserted that there would be no violation of
FCTC if the government officials participate in the APTF meeting. The Delhi High Court dismissed the
Writ Petition.
While describing the NGO petition, the High Court notably remarked:
"It is further contended that the said participation by the Government of India would be in
violation of its obligations under the FCTC and contrary to public interest…. We have
during the hearing enquired from the senior counsel for the petitioner, whether the minds
of the government functionaries who are shown to be the participants in the said
conference are to be taken as so feeble as to be influenced by the co-sponsors / co-host of
the conference even if they are taken to be lobbying in favour of tobacco and tobacco
products. We had yet further enquired whether such lobbying / influencing, even if any, is
dependent upon the participation in the conference and cannot be otherwise. We have also
wondered whether the citizens of the country and the Courts are to be so distrustful of their
government, for the Courts being required to keep the government functionaries in glass
houses, protected from uncalled for influences."
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The High Court also clearly debunked the purported violation of the FCTC:
"The senior counsel though agreeing that we cannot proceed on the premise that the
government and the government functionaries are susceptible to such influence, then fell
back on the Government of India being required to honour its obligation under the FCTCâ
€¦.The Guidelines issued there under…only require interaction with the tobacco industry
on matters related to tobacco control or public health to be accountable and transparent
and do not prohibit the governments of the covenanting States from participating in
conferences…"
The High Court's summary findings as given below, strongly supported ITIC and the APTF, with sharp
wording for the plaintiffs:
++ "There is merit in the contention of the counsel for the respondent UOI that the
proposed conference is not concerned with the use of tobacco and tobacco productsâ
€¦[counsel has] drawn our attention to the agenda for the proposed event to demonstrate
that the same is unrelatable to tobacco."
++ "Faced therewith, the senior counsel for the petitioner stated that ITIC was nowhere
disclosing that it was alter ego of the tobacco industry."
++ "We cannot presume that the government functionaries who have consented to
participation in the conference have done so mindlessly….The petitioner has not been able
to invoke any ground in law where under we can restrain them from so participating....We
therefore do not find any merit in the petition which is dismissed."
The NGO's aforesaid action could not dent the substantive issues deliberated in the Forum, as would be
evident from foregoing paras. However, Government officials from India could not attend the Forum,
and thus they missed a great opportunity to discuss the challenges, trade-offs and experience with
internationally acclaimed tax experts on the burning issues like GST, Transfer Pricing and Customs
Valuation, BEPS, Tax Administration Reforms, Dispute Resolution Process & Tax Incentives.
Summing up, the participation in the APTF Delhi was a great learning process from the galaxy of tax
experts. The forum was attended by 68 taxmen and taxpayers from 22 countries out of which 15 were
from the Asia Pacific Region. They represented Government Officials, International Organizations and
Private Sector. A great Forum to remember for a long time to come. A senior Government Official from
the Finance Ministry of Indonesia invited all present for the next APTF to be held in Jakarta in 2016.
[The author is former Chairman, Central Board of Excise & Customs and he is also the author
of the book - "GST in India, its travails, tribulations and challenges ahead". The views
expressed are strictly his personal]
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