Australia has been correct in pinpointing that there was a need to know that governments will not change or tinker with the rules after investments were made by investors and that tax systems be reinforced to ensure fairness, a research paper 'The G-20: Challenges and opportunities Ahead' by Australia India Institute said.

"Clarity in tax policy is essential to prevent money laundering and to undermine the black economy. Avoidance of legitimate tax through transfer pricing and other strategies should be stopped," the paper said.

"India should underpin this Australian initiative through its own assent and also by not changing investment rules and tax policies retrospectively," it said ahead of the G-20 summit to be held in Brisbane on November 15 and 16.

"Structural reforms and attracting investment in infrastructure are essential to move India to a higher growth path. Investment is important considering India's abundant demographic dividend," the paper said.

"Australia can serve as a natural partner for India by providing the capital required for both social and physical infrastructure," it said adding India's long drawn out power shortage was due to end with the two sides inking a civil nuclear deal recently.

The return on capital (real rate of interest) in Australia is low and Australian capital will have better returns when invested in physical infrastructure in India, the paper pinpointed.
"As the level of capital already deployed in India is low, the return on additional capital investment will always be higher in India than in other ASEAN countries or in China," it said.
"There is therefore value in this partnership. And indeed, Australia-India cooperation has gone beyond energy to areas ranging from defence collaboration to science, water, education and skills. Australia's formula for growth through public-private partnerships merits the support of other G-20 economies, both advanced and emerging, including India," it added.
The research paper said since March 2012 India's image as a favourable investment destination was severely dented specially post Vodafone case, where the centre retrospectively changed the tax laws to penalise the UK-based telephone giant, the cancellation of 2G mobile licenses, introduction of General Anti-avoidance Rules (GAAR) in the 2012 Budget, and the case of South Korea's steel major POSCO.

It also said that Australian government led by Tony Abbott has favoured created the right conditions for private enterprise as the best way governments can increase job opportunities and raise productivity.

"Through it presidency of the G-20 Australia thus has the standing and the motivation to press European leaders to undertake structural reforms, including more liberal immigration policies".

"It will not however be an easy task," the paper said adding that Australia will find an able partner in India, given the latter's experience with Mode-4 services.

In the classification scheme of the WTO, Mode-4 services are those supplied by individuals present in person. The term is used to refer to the movement of natural persons, such as IT professionals, scientists and others, traveling from their own country to provide services in another country.

It also stressed that Australia was keen to help developing and less developed economies lacking expertise to prepare project reports required to attract infrastructure related funds which can be significant benefit for India,that has huge infrastructure deficit.
The G-20 countries include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russian Federation, Saudi Arabia, South Africa, Turkey, United Kingdom, United States—and the European Union.




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