India Think Tank’s Simpler-Tax Proposal Might Fall Far Short

An Indian government think tank’s proposal to simplify how foreign companies allocate taxable profits from their activities in India could reduce tax disputes, but might not make companies’ life much easier.

The National Institution for Transforming India, or NITI Aayog, recommended introducing an option for foreign companies to use pre-set profit rates per industry to help resolve arguments about taxes owed when a business has “permanent establishment” in the country.

For multinationals with operations in India, the approach would be an alternative to current labor-intensive, expensive processes, particularly determination of an arm’s-length price for doing business ...