‘Govts should reduce personal,corporate taxes,increase burden on consumption’

Governments must have a strong fiscal position to ensure that everyone pays tax,says OECD secretary general Angel Gurria

Written by Surabhi | Published: October 16, 2012 1:17 am

Governments must have a strong fiscal position to ensure that everyone pays tax,says OECD secretary general Angel Gurria. In an interview with Surabhi,Gurria,who is attending the Fourth OECD World Forum in India,says that euro zone is putting in place strong structural reforms that will help it solve the crisis. Excerpts:

What are your views on the recent tax proposals in India such as GAAR and retrospective amendments that are being reviewed by the government?

Since these are still playing out as we speak,I don’t want to comment. But these are evidence of India trying to modernise and upgrade not only the structure but also the administration of its tax system. One can have a very modern transparent tax structure but if it isn’t administered properly,there will not be revenue. India has been a very active participant at OECD on avoiding tax payments through tax havens…

Tax evasion — an issue on which OECD has done significant work is a big political issue in India. Your views:

I am from Mexico,which is an emerging economy like India. When I was in Mexico,about 70 per cent of the legal battles we had went all the way to the Supreme Court and we lost them because the laws were not very well written and diluted and there were many loopholes. So one of the problems we have in countries like ours is that we should raise more taxes,not by increasing the tax rates but by collecting the taxes that are hidden in the books in order to provide better services. Governments should have a stronger fiscal position by demanding that everyone pays tax and also by moving the tax structure to reduce personal income tax and the tax burden on companies and increasing the tax burden on consumption,increasing green taxes and also improving the tax burden.

The euro zone crisis is considered as the deciding factor in the world economy…

The euro zone crisis is not only a problem for Europe anymore as the European Union forms a large chunk of the world economy and accounts for almost one-fourth of the total trade. If that is growing very slowly,it will have an impact on everything else,including the confidence level and the markets. On the other hand,it’s become faddish to do lots of Euro bashing. But there has to be an objective analysis. Europe in the last six months has done a lot: Long term refinancing operations (LTRO) has stabilised the markets,a fiscal union has been signed,European banking regulator is being set up and the ECB is willing to buy bonds. So by the time,Europe takes off the scaffolding,it will be beautiful. But these things take time. The mood in Tokyo during the IMF meetings was very encouraging based on the building blocks put in place by Europe. There is political will and agreement. The issues are much better understood and there is a willingness to share the risks. These are very important advances.

By when do you expect a revival in the euro zone?

Before there can be a revival,four policy issues have to be addressed by all countries – be it Europe,the US,Japan or emerging economies. These policy issues include – go structural ,by addressing issues of education,innovation,competition,labour market flexibility,etc; go social by looking after the victims of the crisis,that is those who are unemployed. Unemployment is not good as it adds to growing inequalities and leads to frustration. In the OECD,there are 15 million people unemployed. We also need to go green and lastly,we need to go institutional — to build and adapt our institutions to new demands of the modern times.

Is the OECD working at improving the tax information exchange system?

110 countries have already agreed to provide tax information on request. We are trying to take it to another level to make it an automatic system as countries today,with their Budget strictures can not afford not to know about these issues.

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