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India introduces new tax rules
SAHU & ASSOCIATES:New tax rules aim to rein in disputes on transfer pricing
The government introduced new tax rules on Wednesday aimed at reducing litigation with multinational firms over cross-border transactions the government considers tax avoidance schemes.
The new "safe harbour" rules aim to clarify transfer pricing, over which disputes have surged under a government drive for revenue to narrow a yawning fiscal deficit and stave off a threatened ratings downgrade.
Revenue secretary Sumit Bose said the new rules would clarify the tax liability of companies.
"It will be applicable for five years beginning assessment year 2013/14," Bose told reporters.
The government later issued a statement laying out the new rules. (http://link.reuters.com/wyx23v)
Multinational firms have drawn increased scrutiny by governments around the world over transfer pricing, particularly following revelations that coffee chain Starbucks Corp (NSQ:SBUX - News) used the practice to avoid paying taxes in Britain.
Transfer pricing, or the value at which companies trade products, services, shares or assets between units across borders, is a regular part of doing business for a multinational. Experts say transfer prices are also a way for a company to minimize its tax bill.