Azim Premji, chairman of India’s third-largest software services exporter Wipro, said developed nations, including the U.S., were responding to the Base Erosion and Profit Shifting (BEPS) project with barriers to free trade triggering a trade war that is detrimental to India.

‘Tax base driven’

The contribution of India to the G20-OECD BEPS project is well known, he said. Developed countries including the U.S. were responding to these changes with a view to regaining the tax base and looking for tax measures like tariffs and outsourcing tax, which serve as a barrier to free and fair trade.

“This has triggered a trend of trade wars which could be detrimental to developing countries like India. Tax administrations of various countries must collaborate better to prevent shrinking of global trade,” Mr. Premji told delegates at the 158th Income Tax Day.

The BEPS refers to corporate tax planning strategies used by multinational companies that artificially shift profits from higher tax locations to lower ones, eroding the tax base of the higher tax locations.

Mr. Premji pitched for lower tax rates in India and said transparency and accountability in collecting taxes would increase the base so that public social investments could rise to the levels required.

“Tax by its very nature is an expropriation under the authority of law. This may lead to some resistance” on account of perceived lack of accountability in public spending, he said.

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