Controlled foreign corporation (CFC) legislation is designed to prevent the accumulation or transferring of profits and income by foreign corporations to or from abroad. The absence of such legislation, gives free and ample opportunity to the residents to set up corporations abroad to lower their tax burden. CFC legislation will remove the shield of the foreign corporations and the profits or income generated and transferred will be taxed. The legislation will empower the authorities to pierce into the accounts of transfer and tax the income which is transferred. Presently corporations operating abroad are retaining earnings and the corporation’s home country may not ever see the funds flow from the corporation to the shareholders. It amounts to defer or evade taxation. Comments from The American President, Barack Obama on outsourcing have some nexuses with CFC. But foods for thoughts before enactment on CFC are:-
1. Post recession time is the right time for such enactment?
2. Whether it will affect on FDI?
3. If it affects on FDI whether it will affect on development and progress of industries?
4. Whether it will give adverse effect on present and future employment opportunity?
5. Which are the areas the exceptions required?
India is taking steps towards implementing CFC, but it requires detailed study on identification of corporations and their taxable income. Corruption may be the next huddle for the execution of provisions made in such enactments. Besides that situation necessitate the detail thinking on Foreign Direct Investment. Due to liberalisation policy announced in the early 90’s, Indian market and industry realized the global standards and it could rise to the world class requirements. This was made possible by the investment of foreign industries and individuals in the form of fund and technology. It is true that CFA is mandatory and it will give an additional financial exchequer to the country but if it affects on FDI then industries may get a set back. Such a set back may not be affordable now as industries are recovering from long persistent economic slow down or recession. The present scenario is the time of post recession. Any decision which adversely affects the industries may in-turn affect the economic growth of the country and such decisions are unwelcome at this point of time.
SREERENGAN V.R.
Asst. Professor
Ramaiah Institute of Management Sciences
#193, New BEL Road, Bangalore
1. Post recession time is the right time for such enactment?
2. Whether it will affect on FDI?
3. If it affects on FDI whether it will affect on development and progress of industries?
4. Whether it will give adverse effect on present and future employment opportunity?
5. Which are the areas the exceptions required?
India is taking steps towards implementing CFC, but it requires detailed study on identification of corporations and their taxable income. Corruption may be the next huddle for the execution of provisions made in such enactments. Besides that situation necessitate the detail thinking on Foreign Direct Investment. Due to liberalisation policy announced in the early 90’s, Indian market and industry realized the global standards and it could rise to the world class requirements. This was made possible by the investment of foreign industries and individuals in the form of fund and technology. It is true that CFA is mandatory and it will give an additional financial exchequer to the country but if it affects on FDI then industries may get a set back. Such a set back may not be affordable now as industries are recovering from long persistent economic slow down or recession. The present scenario is the time of post recession. Any decision which adversely affects the industries may in-turn affect the economic growth of the country and such decisions are unwelcome at this point of time.
SREERENGAN V.R.
Asst. Professor
Ramaiah Institute of Management Sciences
#193, New BEL Road, Bangalore
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