The big push for tax reforms in the forthcoming Budget is likely to be on creating a suitable environment for easier flow of foreign direct investment.
While there are few specific tax provisions in the statutes that differentiate between foreign and domestic investments, government sources said the thrust of the two committees working on reforms in direct and indirect taxes would focus on removing hindrances in tax procedures that foreign investment baulks at, instead of creating a fresh set of incentives for them.
Accordingly, the committees on direct and indirect tax reforms set up by finance minister Jaswant Singh are examining the issues involved in phasing out exemptions and subsidies, tax administration reforms, setting up mail boxes for receipt of documents and a review of powers to summon and prosecute companies.
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The committees chaired by Vijay Kelkar, adviser to finance minister have representatives from different sections of the industry and the revenue department of the finance ministry.
According to sources associated with the committee, while FDI does not flow in on the basis of tax environment, it is necessary to create