India-UK aim to speed-up free trade negotiations
India’s Prime Minister Narendra Modi has agreed with his British counterpart Rishi Sunak to speed up the progress of the India-UK free trade agreement (FTA) negotiations.
In a telephone conversation the two leaders agreed to follow up their discussions at the G7 meeting in Japan next month and the G20 Summit being hosted by India later in the year.
“The leaders reflected on the close friendship between the two countries, and agreed great progress was being made on the 2030 UK-India Roadmap,” a spokesperson for Sunak said.
“Discussing ongoing negotiations on a UK-India Free Trade Agreement, the leaders reflected on the huge opportunities a deal would offer to Indian and British businesses and consumers. Both agreed to direct their teams to expedite progress to resolve outstanding issues and ensure a world-leading deal that would see both economies thrive,” they said.
Both the UK and India are committed to delivering an ambitious and mutually beneficial FTA and concluded the latest round of trade talks last month, said a UK Department for Business and Trade spokesperson.
According to official UK government statistics, the India-UK bilateral trading relationship was worth £34bn in 2022, growing by £10bn in just one year.
These statistics are expected to be dramatically enhanced with a successful FTA, the government spokesman said.
Direct tax laws may be updated, media reports
India is preparing an overhaul of its direct tax laws to replace the current complex set of rules, according to PM Narendra Modi, according to media reports.
Quoting sources close to the government, the Business Standard website said that at the heart of the changes are potential increases in capital gains taxes for top income earners. They said that while India levies a tax of up to 30% on income, it taxes gains on certain asset classes such as equity funds and stocks at a lower rate.
The website reported that a panel may be appointed to build on proposals submitted to the Finance Ministry in 2019 with an eye to implement in 2024, though it said no final decisions have been made.
“Our income tax rules, particularly capital gains provisions, have become a patchwork over the decades,” said Rahul Garg, partner at PwC. “While there is a need to make them easier and equitable, implementing a system which is a win-win for all won’t be easy.”
Another expert said tax policy should not be changed until about 25% of India’s population is invested in equity, said Deven Choksey, managing director of KR Choksey Shares & Securities. One estimate suggests only 3% of India’s population invests in stock markets at present.
India’s reliance on indirect taxes rather than direct taxes on capital is often cited by economists as the main culprit behind the country’s poor getting left behind even as the nation minted 70 new millionaires each day between 2018 and 2022. Oxfam International estimates the top 10% of India’s population holds 77% of the nation’s wealth.
The Business Standard website noted that during his first term in office Prime Minister Modi “transformed India into a single unified market by replacing multiple indirect taxes with a goods and services tax in 2017. A new direct taxes law would complete his tax overhaul; boosting living standards across the population is key for him to market India as a consumer destination that global businesses should target,” it said.
“An overhaul of the six-decade-old income tax law was first proposed under Modi’s predecessor in 2009 but successive governments have failed to complete it. While India has tweaked some tax rates and exemptions for individuals and companies, it is still trying to address some other issues such as standardizing the tax rates on capital gains.
“With a new direct taxes code, the government is also looking to replace India’s complicated tax system with a simpler law to draw in companies looking to shift their operations out of China amid growing tensions between Washington and Beijing.”
