Lift ban on investment through OCBs: Hinduja
In the upcoming Union Budget, the government should also consider bringing NRIs at par with the resident Indians in terms of their investments and taxation, said the Chairman of Hinduja group, an estimated USD 25 billion conglomerate with presence across automobile, banking and energy sectors among others across 50 nations, including India.
Listing out the `tasks and opportunities for the government` during the Budget for 2012-13, to be presented on March 16 by Finance Minister Pranab Mukherjee, Hinduja said that there was also a need "to regularise political funding and eliminate its corrosive influence of corruption."
To tackle the menace of black money, he said, the government could consider an amnesty scheme to make accountable the illicit funds allegedly stashed abroad. He further said that the government should also push forward various economic reforms, including opening up of retail business for foreign investment and further liberalisation of FDI rules in insurance and other sectors.
While suggesting agricultural reforms in the country, Hinduja said that NRIs should also be allowed to purchase farm land or take on long-term lease (over 10 years), as this will bring latest technology and modernise agriculture sector.
For NRIs, he said that the country should introduce the concept of International Trust and lift the ban on investments through Overseas Corporate Bodies (OCBs). "A large number of NRIs have their wealth in corporates. The OCBs should be permitted to invest as long as proper disclosures are in place and `Know Your Customer` information is suitably provided," Hinduja noted.
"By lifting the ban on OCBs and simplifying the procedures for individual NRI investments, the market will be widened with more players," he said.
Hinduja also said that concerns about corruption has impacted the business confidence and FDI flows, besides hurting the government and its image. "This is a cancer which must be addressed. Unstructured, non-institutional political funding is the root of corruption in India. Electoral reforms may be introduced to regularise and make political parties accountable for funds received.
"… state funding of political parties` election expenditure can be part of a large scheme of political, electoral and taxation reform to stop the flow of money into parallel economy," he said.
On black money, Hinduja said that many developed countries have opted for a 20-30 per cent tax to make such funds accountable and Switzerland is now responsible to debit this tax.
India could also consider entering into similar agreements with foreign countries so that the unaccounted wealth abroad comes to India and gets taxed, he said, while noting that such funds could help reduce its fiscal deficit. He said that bold actions must be taken to lower consumption subsidies and boost investments, as the fiscal deficit was expected to outstrip the budgeted levels.
Hinduja also expressed concerns that lack of rural jobs was leading to millions of people migrating to cities and a Social Improvement Fund could be created to provide jobs to the poor. The urban rich and well-off people could be given tax benefits for contributing to this Fund.
On the banking sector, Hinduja said there was a need to synchronise the RBI norms and the tax regulations. "A huge number of cases are pending at various levels arising out of different stand taken by Income Tax Department than the guidelines issued by RBI to banks," he said, while adding that a synchronisation of guidelines would help avoid wasteful expenses on litigation.
He also said that banks should be allowed to mobilise funds through long-term infrastructure bonds, where tax benefits are available for investors. He also said there was an urgent need to move ahead with various pending amendments to the Banking Regulation Act, 1949, involving issues like voting rights, common directorship and issue of preference share capital by private banks.