The Hindu Business Line : Effectiveness of tax concession wars

Can aggressive tax concessions effectively attract foreign investors? An answer to this question may lie in the China example, discussed in Globalisation and Development edited by Ashwini Deshpande (www.oup.com).

In the `dragon land' local governments adopted specific taxation policies for FDI (foreign direct investment). These sops took many forms, such as `a friendly package' for JVs (joint ventures), tax holidays, and preferential taxation. The idea was `to accommodate regional differences in the business environment and the timing of economic opening and liberalisation.'

However, the `tax concession war' proved to be ineffective in influencing foreign investors' location decisions, notes Jinkang Zhang's essay included in the book. "Conversely, it created the impression that China had unstable and inconsistent tax policies," the author observes.

"This was detrimental to the Chinese Government's persistent efforts to create a sound tax climate. As a result, the State Administration of Taxation (SAT) had to order the local governments to delete or revise all tax provisions not mandated by national legislation, in order to provide a consistent and sound tax climate for FDI."

Useful lesson.

How to face the taxman?

You can get the results you want `without raising your voice, losing your cool, or coming to blows,' assures Robert Mayer, in How to Win Any Negotiation (www.jaicobooks.com).

"Being a winner is not what you do but what you are," he says in the opening chapter. And he presents the secrets of influencing others in LANCER - an acronym for linkage, alignment, needs, control, evaluation and reading.

The book outlines techniques for tackling varied situations, such as apartment lease, business purchase, collecting money, insurance claim, salary hike, job interview, prenuptial agreement.and the taxman.

On the last, sample these imperatives: "Be prompt. Be seemingly cooperative. Have neat, accurate, and complete records. Be cordial, not rude.

Be polite, not friendly. Being threatening or antagonistic will only make matters worse. Act as if you are in control. Set out your position clearly and strongly. Be affirmative."

Only answer the questions asked, but think about your answer before responding, advises Mayer. "Don't get rattled. Unless you are answering a question, don't speak. Don't volunteer information or documents."

He also cautions taxpayers that your `nemesis' on the other side of the table may be good at reading body language! "Try to look relaxed," therefore. "If you become concerned with how the meeting is progressing, you may call it to a halt at any time for the purpose of retaining a professional to represent you."

Survival tips!

D. MURALI

http://BookPeek.blogspot.com