THE FUTURE OF TAX COMPLIANCE IN 2022 & BEYOND - Business Guardian
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THE FUTURE OF TAX COMPLIANCE IN 2022 & BEYOND

When the taxation system will become fully transparent and fair, the tax administrators will no
longer be perceived by the businesses as the enforcers but as their partners

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The world is opening up again. As businesses begin to pick up momentum, tax regulators worldwide are looking at ways to increase their revenues while remaining lucrative. 

Tax compliance administrators are not only offering competitive tax rates, they are also rolling out tax efficiency initiatives. These include initiatives that will help streamline compliance processes like creating digital platforms for easier submission of tax returns and tax data. They are also working toward reducing the tax gap by introducing global standards to cut down tax avoidance and tax evasion. As digital taxation becomes a prime area of focus for compliance bodies worldwide, it becomes imperative to imagine the digitally evolving future of compliance and the trends that will shape its path. Let’s understand what these trends are and how they will change tax compliance strategies across the globe. 

Automation & AI are redefining tax compliance 

The volume and complexity of regulations make it increasingly urgent to adapt to automation solutions. Time and again, surveys around the world show that CFOs are hesitant about investing in tax technology and digitising taxation in their organisation. However, tax automation and artificial intelligence (AI) solutions will be the key to maintaining successful compliance with rapidly evolving tax compliance policies and processes.

Coined as “regtech” or regulatory technology, these systems are likely to govern taxation systems on home ground and the international front. Manual tax operations are expected to make way for more sustainable working models to reduce the risk of human error. AI solutions will help maintain data transparency and increase productivity.

As businesses, both large and small, jump onto the tax digitisation bandwagon, maintaining compliance using tax automation systems will become a standard operating procedure in the future. Automation and AI are replacing manual processes, producing better service-driven organisations. And this is only the beginning. 

Tax administrators are no longer enforcers but partners 

As tax administrators roll out new tax initiatives to make tax and compliance processes more straightforward, their rather unpopular perception of the ‘enemy’ is steadily changing. New digitally dependent tax platforms to submit tax data and file tax returns are increasingly user-friendly and transparent. 

Tax administrations are also using data analytics and AI solutions to zero down on tax avoiders and evaders. As more businesses start to fall under the tax regime and more revenue is collected, the cost of taxation is likely to reduce. Think of it as rapid horizontal growth instead of vertical growth – the more businesses under the tax net, the higher the opportunity to reduce the tax rates. 

Additionally, tax administration initiatives are actively looking to maintain data transparency in an earnest bid to build trust. When the taxation system is transparent and fair, it is only a matter of time until businesses start to view tax administrators as partners. 

User-centric tax solutions to drive tax participation 

In a time when we can hyper-personalise something as simple as our shampoo, hyper-personalised tax solutions have the potential to redefine the tax operations game. Today’s tax administrators are adopting best practice tax policies from across the globe, and compliance software providers are quickly adapting their offerings to suit the changes. 

For instance, when India introduced e-invoicing, tax technology providers like Avalara quickly amended their compliance suite to adapt to the new regulatory requirements. But that’s not all that is happening. Tax solutions are becoming more and more user-centric. Solutions are being built keeping in mind specific industry verticals including manufacturing-based businesses, organisations conducting cross-border transactions, etc.

Because the nature of tax transactions might differ between industries, it becomes vital to cater to such a need. Differing tax and compliance policies for varied industry verticals are more likely to need user-centric compliance systems. Additionally, such tax and compliance solutions are likely to drive tax participation. 

Leveraging the power of real-time data using AI 

One of the most exciting developments in tax technology in the last few years has been the focus on leveraging real-time data. Enabling tax data capturing in real-time is highly likely to reduce the chances of reassessment and help maintain data integrity and accuracy. Several taxation systems are starting to mandate the integration of thirdparty platforms for more accurate data capture, amplifying the critical need to leverage real-time data.

It is a popular belief that combining thirdparty payment and data platforms will allow artificial intelligence systems to recognise business vulnerabilities, help organisations seek support, and easily avoid compliance violations. 

Real-time data integration will also enable tax administrators to flag off tax offenders and reduce the chances of revenue losses due to tax evasion. Even though the phrase is currently bordering on cliche, it nonetheless stands true – the future is digital. Digital tax solutions are expected to play a critical role in how tax administrators and taxpayers will deal with tax – in 2022 and the near future. (The author is the founder and CEO of Alea Consulting)

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Tesla eyes India market as Elon Musk makes bold AI prediction

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In a recent X Spaces session with Nicolai Tangen, CEO of Norges Bank Investment Management, Tesla CEO Elon Musk emphasized the importance of electric vehicles (EVs) in India, stating that it’s a natural progression for every country to embrace them. Musk highlighted India’s status as the most populous country globally and stressed that electric cars should be accessible to Indian consumers like they are in other parts of the world.

Musk’s comments coincide with Tesla’s intensified efforts to expand its presence in the Indian market. Sources reveal that the state governments of Maharashtra and Gujarat have extended enticing land offers to Tesla for the establishment of a cutting-edge EV manufacturing plant. The proposed investment for this venture ranges between USD 2 billion to USD 3 billion, demonstrating Tesla’s commitment to both domestic and international markets.

This move aligns with India’s new EV policy, which aims to attract investments from global EV manufacturers and promote the adoption of advanced EV technology among Indian consumers. The policy emphasizes the importance of domestic value addition (DVA) and sets specific localization targets for manufacturers establishing operations in India.

To incentivize investment, the government has introduced measures such as customs duty exemptions and import quotas for EVs based on the level of investment made by manufacturers. These initiatives aim to position India as a preferred destination for EV manufacturing and contribute to the country’s Make in India initiative.

In anticipation of these developments, Tesla plans to dispatch a team of experts to explore suitable locations across India for the proposed manufacturing facility. Musk’s previous statement about visiting India in 2024 further underscores the company’s eagerness to enter the Indian market and collaborate with local stakeholders.

Tesla’s expansion into India represents a significant step forward in the global EV landscape and underscores the company’s commitment to sustainable transportation solutions. With India poised to become a key market for electric vehicles, Tesla’s entry is expected to drive innovation and accelerate the adoption of EVs in the country.

As the electric vehicle market continues to evolve, Tesla’s entry into India holds the potential to reshape the automotive industry and contribute to India’s transition towards a greener and more sustainable future.

Tesla’s entry into the Indian market not only signifies a pivotal moment for the country’s automotive industry but also presents an opportunity for Tesla to capitalize on India’s growing demand for electric vehicles. With the Indian government’s focus on promoting clean energy initiatives and reducing carbon emissions, Tesla’s electric vehicles align perfectly with India’s sustainable development goals.

Moreover, Tesla’s presence in India is expected to stimulate job creation and economic growth, particularly in the manufacturing sector. The establishment of a state-of-the-art manufacturing plant will not only provide employment opportunities for local residents but also foster the development of ancillary industries and supply chains.

In addition to manufacturing, Tesla’s entry into India is poised to catalyze advancements in EV infrastructure and technology. As Tesla vehicles become more accessible to Indian consumers, there will be a corresponding need for charging infrastructure and support services. This presents opportunities for collaboration with local businesses and government agencies to build a robust EV ecosystem.

Furthermore, Tesla’s entry into India could spur competition and innovation in the domestic automotive market, encouraging other manufacturers to invest in electric vehicle technology. This competition could lead to advancements in battery technology, vehicle performance, and affordability, ultimately benefiting consumers.

Overall, Tesla’s decision to establish a manufacturing presence in India reflects the country’s growing importance in the global automotive industry and underscores India’s potential as a key market for electric vehicles. As Tesla’s footprint expands across the country, its impact on India’s economy, environment, and technological landscape is expected to be profound.

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Air India, BIAL Partner to Create South India’s Top Aviation Hub

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Air India and Tata Group airlines will partner with BIAL to improve airport services and connectivity at Bengaluru’s Kempegowda International Airport, including setting up an exclusive lounge for premium passengers.

Air India and Bangalore International Airport Limited (BIAL) have entered into an agreement aimed at bolstering Bengaluru’s status as a premier aviation hub for southern India. The collaboration seeks to enhance air travel connectivity to and from India over the next five years.

Under the agreement, Air India, along with other Tata Group airlines such as AIX and Vistara, will work closely with BIAL to improve international connectivity, operational efficiency, and passenger experience at Kempegowda International Airport, Bengaluru (KIAB or BLR airport). This includes plans to strengthen the group’s presence at the airport and establish a dedicated domestic lounge for premium and frequent travelers of Tata Group airlines.

Furthermore, Air India has signed a memorandum of understanding (MOU) with the Government of Karnataka to develop maintenance, repair, and overhaul (MRO) facilities at the Bengaluru airport. This partnership aims to stimulate the MRO ecosystem and create over 1,200 new job opportunities in the state.

Campbell Wilson, CEO and MD of Air India, emphasized the importance of airline-airport synergy in enhancing customer experience and operational efficiency. He expressed enthusiasm for strengthening Air India’s relationship with BIAL and expanding its presence at the airport, as well as establishing a major MRO center.

Hari Marar, MD and CEO of Bangalore International Airport Limited, highlighted the BLR airport’s commitment to becoming the international gateway in Southern and Central India. He stated that the collaboration with Air India aligns with the Ministry of Civil Aviation’s vision of developing Indian airports as hubs and aims to enhance the passenger experience. Marar also expressed ambitions to capture a significant share of long-haul routes from Bengaluru Airport over the next five years.

In related news, Air India announced the appointment of Jayaraj Shanmugam as its Head of Global Airport Operations, effective April 15. Shanmugam, who previously served as the chief operating officer (COO) at BIAL, brings extensive experience to his new role.

The collaboration between Air India and BIAL represents a significant milestone in the transformation of Bengaluru into a key aviation hub in the region. By leveraging each other’s strengths and resources, the partnership aims to not only enhance air connectivity but also contribute to the economic growth of Karnataka by generating job opportunities through the establishment of MRO facilities.

Jayaraj Shanmugam’s appointment as the Head of Global Airport Operations further solidifies Air India’s commitment to optimizing its airport operations and providing a seamless travel experience for passengers. His extensive experience in airport management, coupled with his previous role at BIAL, positions him well to drive operational excellence and efficiency within the airline.

As the aviation industry continues to evolve, alliances between airlines and airports are becoming increasingly vital to meet the growing demands of travelers and enhance overall competitiveness. The strategic collaboration between Air India and BIAL sets a precedent for future partnerships in the aviation sector, emphasizing the importance of cooperation and synergy to achieve common goals.

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March sees strong growth in Indian pharma market, up by 9.5%

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The Indian pharmaceutical market (IPM) experienced a notable 9.5 percent increase in sales in March, reflecting robust value growth across various therapy segments, except for respiratory. According to data from research firm Pharmarack, all therapies demonstrated positive value growth, contributing to the overall expansion of the market.

Sheetal Sapale, Vice President-Commercial at Pharmarack, noted that while many pharmaceutical companies showed double-digit value growth, unit growth remained a challenge. The growth in sales during March was primarily driven by value growth and new introductions, particularly in the anti-diabetic segment.

Several factors contributed to the uptick in sales, including new product introductions and patent expiries. For instance, there were multiple launches in the hematinic market following the loss of exclusivity rights for iron supplement Orofer FCM in October 2023. Additionally, patent expiries for drugs like Linagliptin and Dulaglutide further fueled competition in the anti-diabetic segment.

In March, Alkem emerged as one of the few companies reporting positive unit and value growth, with a 15.1 percent increase in value and an 11.3 percent increase in units sold. Other key players such as Cadilla, Fourrts, and Natco Pharma also witnessed double-digit value and unit growth during the month.

The top-selling medicine brands in March included Glaxo Smith Kline’s Augmentin and USV’s Glycomet GP, with Augmentin achieving sales of Rs 73 crore. Despite facing challenges in unit growth, Augmentin reported a 10 percent increase in value sales. Mankind’s Manforce condom brand retained its position as the third top-selling brand, despite negative unit and value growth.

Cipla’s Foracort inhaler maintained its fourth position in the respiratory segment, with sales totaling Rs 50 crore. Abbott’s Type 2 diabetes/weight management drug Rybelsus demonstrated remarkable growth, with a double-digit value growth rate of 7 percent and a staggering 75 percent increase in units sold in March.

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McDonald’s buys all Israeli franchise restaurants amid boycotts

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Aljazeera said that McDonald’s announced it will purchase its 30-year-old Israel franchise from Alonyal Ltd., taking back control of 225 outlets that employ more than 5,000 people. After US fast-food business Alonyal announced that it would be giving free meals to the Israeli soldiers in response to the October 7 bombing by Palestinian group Hamas, there were protests and boycotts. While McDonald’s is a global corporation, its franchises are typically locally owned and operate independently. Its CEO, Chris Kempczinski, said previously that the company had seen “meaningful business impact” in several markets in the Middle East and some outside the region due to the Israel-Hamas conflict, as per Aljazeera.

“For more than 30 years, Alonyal Limited has been proud to bring the Golden Arches to Israel and serve our communities,” Omri Padan, CEO and owner of Alonyal, said in a statement on Thursday. According to Aljazeera, McDonald’s added that it “remains committed to the Israeli market and to ensuring a positive employee and customer experience in the market going forward.” Following the transaction’s completion in the coming months, McDonald’s will assume ownership of Alonyal’s outlets and operations, maintaining its current workforce. However, the terms of the transaction were not disclosed by the companies involved. In February, Kempczinski said that the war had had a “disheartening” effect on sales in Middle Eastern countries and other Muslim-majority nations such as Malaysia and Indonesia. “So long as this conflict, this war, is going on, we’re not expecting to see any significant improvement in this,” Kempczinski said in a conference call. “It’s a human tragedy, what’s going on, and I think that does weigh on brands like ours.”

During October–December, sales growth for the fast-food chain’s Middle East, China, and India division was only 0.7 percent, significantly lower than market projections of 5.5 percent. This decline follows calls for a McDonald’s boycott by customers in Muslim countries, prompted by Alonyal’s announcement. Consequently, franchisees in nations like Egypt, Jordan, and Saudi Arabia distanced themselves from the donations, collectively pledging millions of dollars in aid to Palestinians in Gaza.

While Chicago-based McDonald’s is known as one of the United States’ most iconic brands, most of its restaurants worldwide are locally owned and operated. Another prominent Western fast-food chain, Starbucks, has also faced boycott campaigns due to its perceived pro-Israeli stance and alleged financial ties to Israel. CEO Laxman Narasimhan told journalists in February that Starbucks saw a “significant impact on traffic and sales” in the Middle East but also in the US, where protesters campaigned against the Seattle-based company, calling for it to take a stand against Israel.

Domino’s, a US-based pizza maker with franchises around the world, also faced blowback after posts on social media claimed without evidence that it had also given free food to Israeli soldiers. The brand’s same-store sales dipped by 8.9 percent in Asia in the second half of 2023, mainly because consumers in Malaysia associated it with the US, an Israeli ally, a company official said.

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Disney CEO targets password-sharing, following Netflix

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Disney CEO Bob Iger has revealed plans to tackle password-sharing on the company’s streaming platform, set to commence in June. Iger stressed in a CNBC interview the importance of consolidating the streaming industry, with the initiative aimed at boosting subscriber growth and improving profitability. He articulated aspirations for achieving double-digit margins for the business.

This move mirrors actions taken by streaming giant Netflix, which experienced a substantial surge in subscribers after cracking down on password-sharing, surpassing Wall Street’s expectations by adding nearly 22 million subscribers in the latter half of last year.

Iger’s announcement closely follows a proxy battle against Disney’s activist investors, including Nelson Peltz, who had criticized Disney’s performance in the streaming-television sector. Reflecting on the outcome of the proxy vote, Iger expressed satisfaction with the resounding endorsement of the board’s strategies, particularly concerning CEO succession. Moreover, Iger has also hinted at ongoing plans regarding partnerships for ESPN.

The victory in the proxy battle strengthens Iger’s position as Disney endeavors to revitalize its film and television franchises, achieve profitability in its streaming division, and establish partnerships for ESPN’s digital expansion.

Last year, Netflix expanded its crackdown on password-sharing to over 100 countries, extending beyond the United States. As part of its efforts to address market saturation and explore new revenue avenues, the platform implemented restrictions on password-sharing and introduced a subscription option supported by ads.

Emails were sent out to customers in 103 countries and territories, including key markets such as the United States, Britain, France, Germany, Australia, Singapore, Mexico, and Brazil, in May 2023. These emails reiterated Netflix’s policy that accounts should only be used within a single household.

To ease the transition, Netflix provides paying customers with the option to add an extra member from outside their household for a supplementary monthly fee. In the United States, this fee amounts to $8 (Rs 660). Members are also given the ability to transfer a person’s profile to maintain their viewing history and personalized recommendations, ensuring a seamless experience.

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India’s Ayurveda market to reach Rs 1.2 trillion by FY28

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The Ayurveda product market in India is poised for substantial growth, with projections indicating a remarkable increase in market value to Rs 1,20,660 crore ($16.27 billion) by FY28 from the current Rs 57,450 crore ($7 billion), according to a study conducted by Ayurveda tech startup NirogStreet.

The surge in the Ayurveda product market can be attributed to several factors, including the escalating demand for natural and herbal remedies both domestically and internationally. Additionally, the rise in the number of Ayurvedic medical practitioners, coupled with government initiatives and the emergence of new entrepreneurs in the sector, has further fueled the market’s expansion.

NirogStreet’s survey revealed that the overall market for Ayurveda products and services is expected to grow at a Compound Annual Growth Rate (CAGR) of 15 percent from FY23 to FY28. Specifically, the product and service sectors are anticipated to witness growth rates of 16 percent and 12.4 percent, respectively, during this period.

The survey also shed light on the Ayurvedic manufacturing landscape in India, estimating its value at Rs 89,750 crore ($11 billion) in FY22. This figure encompasses the value of exports, amounting to around Rs 40,900 crore ($5 billion), with imports estimated at Rs 8,600 crore ($1 billion).

Participation in the survey was significant, with approximately 7,500 manufacturers from 10 states, including Uttar Pradesh, Bihar, Madhya Pradesh, Delhi, Haryana, Rajasthan, Punjab, Maharashtra, Jammu and Kashmir, and Kerala.

At a recent CII AYUSH Conclave, Padmashri Vaidya Rajesh Kotecha, Secretary, Ministry of AYUSH, emphasized the importance of positioning AYUSH products in global markets and fostering innovation within the ecosystem. He highlighted that the AYUSH sector has witnessed remarkable growth, reaching $24 billion in a span of 10 years.

In light of this exponential growth trajectory, NirogStreet underscored the significant potential of the Ayurveda product market to become a key contributor to India’s economy.

The recent surge in the Ayurveda product market underscores a broader global trend towards holistic and natural wellness solutions. As consumers increasingly prioritize health and well-being, Ayurveda’s ancient wisdom and emphasis on holistic healing are gaining traction worldwide.

India’s rich heritage in Ayurveda positions it as a global leader in this burgeoning industry. The country’s vast array of medicinal herbs, traditional knowledge, and skilled practitioners serve as key assets in driving the growth of the Ayurveda sector. However, amidst the promising growth prospects, challenges persist, including the need for stringent quality control measures, standardization of products, and greater awareness about Ayurveda’s efficacy. Addressing these challenges will be crucial in ensuring the sustainable growth of the industry and maintaining consumer trust.

The endorsement of Ayurveda by government authorities and the proactive role of industry stakeholders in promoting innovation and research are essential steps towards realizing the full potential of the sector. In conclusion, the projected growth of India’s Ayurveda product market signifies a transformative shift towards holistic wellness and natural remedies. With concerted efforts from both public and private sectors, the Ayurveda industry is poised to emerge as a significant driver of economic growth while enriching lives with its time-tested principles of well-being.

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