We have had lot more enquiries about India from smaller companies: Jane McCormick, KPMG

New Delhi: India's reform pitch has generated interest among smaller businesses, said Jane McCormick, KPMG's new global tax head. "We are definitely hearing a lot more from people," said McCormick, who has been at the firm for more than 25 years.

"It's been noticed in the last sixnine months. We've had lot more enquiries about India from clients, particularly small businesses. Larger businesses have probably already investigated, planned or invested. What is particularly striking is that the next level of investors are thinking of India as a place that they could do business."

However, she said there was an element of caution among them. "The global economy is fragile... There is a caution about investment in general and it is not just about India," she said. "People are liking what they are hearing (about India)... It's a bit of wait and see to see if the change is happening on the ground."

McCormick, who was a tax inspector in the UK before joining KPMG, stuck a note of caution on changes to tax policies.

"I would encourage going not too fast. If it's hurried, it's nearly as bad a legislation... You have unintended consequences and you end up making legislations more complicated," she said. She commended the idea of having a roadmap for tax reform.

Referring to the government's new corporate tax rate framework, she said there seemed to be a roadmap and that it was heading in the right direction.

She said a lower rate that can lead to a sustainable return on investment is welcome.

Finance minister Arun Jaitley had in the last budget announced that the government would lower the corporate tax rate to 25% from 30% in the next four years along with the phasing out of exemptions. Responses have been sought to a proposed timetable for scrapping exemptions.

However, some breaks should remain.

"It would be crucial that important reliefs are kept... Tax deductions for capital depreciation in assets, ease of tax administration would be important," she said.

To attract investment, India needs to consider returns on investment in the country compared with others.

"High withholding tax rates can make investments uneconomic particularly for SWFs (sovereign wealth funds) and pension funds who are essentially the long-term investors investing in infrastructure," she said.

She said the new base erosion and profit sharing framework could have implications for infrastructure financing, which is largely by way of debt.

"The way thinking on tax deductibility of interest costs is going, it doesn't take into account circumstances of infrastructure investment," she said. "It could be very damaging if you can't get debt financing into infrastructure, you can't get it off the ground... This is particularly important for India."

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.