The digitisation of the tax system, successfully implemented over the past years, could unleash the next wave of transformation.

The question is whether 2024 will be the year when the government will roll out an integrated data vision. This could be envisaged as a system where data collection, reporting and exchange elements move automatically through machine to machine-based processes between government and business taxpayers. The system could potentially bring in greater real-time tax compliance. Measures like SAFT-T, as recommended by OECD for electronic exchange of reliable accounting data from organisations to a national tax authority or external auditors, may be introduced.

In 2023, GST collections grew over 13 per cent. To accelerate the growth in collection beyond the nominal GDP growth, better data analysis and technology could be harnessed to plug compliance gaps.

A tax policy change is expected in the field of carbon pricing. The European Union (EU) has introduced carbon border adjustment mechanism which will transition to imposition of import levies on specified goods imported into the EU from countries with less stringent climate policies. Other countries have or are expected to adopt similar measures. Therefore, the government will need to pursue appropriate policy responses, even as Indian industry must adopt measures to not just ensure expeditious compliance but also benefit through opportunity for trade diversion.

Green projects

To secure long term funding for green projects, the RBI has thus far raised ₹210 billion via sovereign green bonds. To supplement this with private issuance of green bonds, appropriate incentives can be provided. This could be done by way of interest, capital gains exemption for the borrower and accelerated tax depreciation on assets acquired with the proceeds of green bonds.

The globalisation of our tax policy is likely to continue, albeit sluggishly. In 2024, the government could provide a roadmap for implementing the minimum corporate tax under pillar 2 of the G20/OECD proposals. Given the complexity of this proposal, it would be prudent to have extensive stakeholder consultations.

Tax certainty, which includes tax predictability, is a fundamental cornerstone of a good tax regime. The Supreme Court’s 2023 decision on tax treaty eligibility based on the Most Favoured Nation clause has implications both for Indian companies and foreign recipients. It is hoped that in 2024, the interim or final Budget proposals bring administrative guidance to mitigate the adverse impact for the investor community.

Conclusion of free trade agreements may experience sluggish progress in 2024, given that more than 60 countries representing half the world’s population, will go to the polls this calendar.

GST and corporate income tax rates are unlikely to see any change in 2024. Individual taxpayers may be encouraged to move to the new exemption-free tax regime over the historical exemption-based tax regime. Individual taxpayers would certainly hope for some relief in the interim budget proposals.

The aspiration of the growing taxpayer community, reflected by the 68 million tax returns in 2023, is best articulated by the Prime Minister’s statement that “….people today feel that their money is being used for nation-building…the trust in developmental works among tax paying people has increased”. A welcome aspiration for the incoming government in 2024 would be to further the implementation environment in which taxpayers can easily comply with the tax process with minimal disputes and avoid lengthy dispute resolution processes.

The writer is President, Tax, Deloitte India

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