India is estimated to have lost Rs22,838 crore in mispriced cross-border transfers and acquisitions in 2010-11 alone even as the country mobilised Rs22,697 crore in taxes on cross-border transactions, finance minister Pranab Mukherjee said today.
Addressing a high-level India-OECD meeting on taxation and transfer pricing in the changed circumstances, Mukherjee said India is strengthening transfer-pricing provisions to check the massive shift of profits to another country through misuse of the provisions.
"The directorate of international taxation has mobilised tax revenue of Rs22,697 crore while the directorate of transfer pricing has detected mis-pricing of Rs22,838 crore," he said.
He said a variety of inter-company transactions, location of companies in various tax jurisdictions and increased global business restructuring are posing challenges to the tax administration on framing transfer-pricing rules.
However, he said business would see an increase in cost of compliance and litigation as more and more countries introduce transfer-pricing rules and tax authorities intensify scrutiny of transactions under transfer pricing rules.
Another area of concern, Mukherjee said, is the rising number disputes in international tax matters. These disputes turn out to be multilateral rather than bilateral due to the linkages in global economy, he noted.