May 11-13, 2008
The Taj Mahal Hotel
Mansingh Road, New Delhi

The Asia Tax Forum raises the bar every year.  The forum in Delhi was attended by senior officials from 12 countries.   Participants from New Zealand, Australia, Sri Lanka and Pakistan attended the ATF for the first time.  There was healthy participation from the private sector especially from financial institutions, and manufacturers of products subject to the VAT and excise tax.   Faculty members from academic institutions added depth to the discussions.  The National Institute of Public Finance and Policy of India was a most efficient host and went out of its way from the very first day of the ATF. The staff members met the participants individually at the airport and served as gracious hosts during the inaugural dinner that was hosted by the Ministry of Finance (MOF).  The panel discussions were chaired by senior officials from the MOF.

Dr. Govinda Rao, Executive Director of the National Institute of Public Finance and Policy and Mr. Dan Witt, President of ITIC welcome the delegates.

In his opening speech, the Honourable C Ranjagaran, Chairman, Economic Advisory Council to the Prime Minister, welcomed an ATF where government officials can interact and share ideas with members of the academe and industry.  Discussions at the ATF can be sources of best practices that can be used as benchmarks in tax administration and compliance.  He stressed the importance of minimizing uncertainties in tax policies and developing tax systems that are simple, clear and transparent.  Although the primary purpose of taxes is to raise revenues, governments should not lose sight of the economic distortions that taxes can introduce.  Dr. Govinda Rao, Executive Director of the NIFP, could not agree more and emphasized the importance of getting the architecture and management of a tax reform correctly.  He welcomed the holding of the ATF at a time when the VAT is being introduced in India.

The participants from the Ministry of Finance of Thailand.

Dr. Kavita Rao, Deputy Director of the NIFP presented an emerging landscape for the Goods and Services Tax for India. A dual VAT, with both the union and state government imposing a GST, is being considered favourably.  Exemptions from the tax will be designed towards a broad-based tax and will be limited to  unprocessed agricultural foods, education, health care, and financial services. Although a 20 percent VAT rate is in accord with the revenue-neutrality criterion, government is exploring other modalities including a tax on luxury items.  The other issues that remain unresolved are the treatment of inter-state transactions and an infrastructure that can promote efficient administration and compliance.
    
The completion of the ATF’s regional tax studies is a milestone of the Delhi forum.   The first of these studies is the “Indirect Taxation of Supplies of Financial Services in Asia” which was conducted by Prof. Lee Burns of the University of Sydney and Prof. Joosung Jun of Ehwa University, Korea, in coordination with senior finance officials from the region. The study reviewed how financial services are taxed in Asia.  In countries like the Philippines and Thailand, financial services are subject to a tax on gross receipts while exemption is provided in Singapore, Indonesia, and Korea.  China, on the other hand, taxes financial services at the margin, i.e. interest received less interest paid.  In these cases, Prof. Burns cites over-taxation (since input taxes cannot be claimed as tax credit) and under-taxation of consumers of financial services at the retail level.   He highlighted the zero-rating of business-to-business supplies in New Zealand as an attempt to address these problems.

The second regional study is on “Excise Tax Expenditures in the Asia Pacific Region” which was presented by Prof. Adrian Cooper of Oxford Economics.  The paper estimated a benchmark tax rate on certain goods that are subject to excise in Asia.  Their volume of production, sales value, tax revenue, and prices were used to estimate a “benchmark” tax rate.  The benchmarks were compared with the actual tax rates and volume of consumption to estimate how much revenues were foregone with the use of lower tax rates.  The study noted that significant tax expenditures exist in Asian tax systems even if they are without any clear economic rationale.  The study noted that benchmarking can be useful in designing tax policies that can improve the equity and efficiency of tax systems.